Polymarket Faces CFTC Probe and Deals With $3 Million Hack

Polymarket is facing a regulatory investigation following reports of an allegedly misleading marketing campaign.

The Commodity Futures Trading Commission (CFTC) is engaged in what CNBC described as an “ongoing and extensive” probe into the prediction market, per a Friday (June 26) report.

This regulatory inquiry comes to light just as the company reportedly manages the fallout of a $3.1 million phishing attack that compromised several user wallets.

The CFTC follows a Wall Street Journal investigative report last week detailing alleged questionable marketing tactics by Polymarket.

That report alleged that the company had flooded social media with seemingly genuine video clips of content creators winning trades on its side. In reality, that report said, Polymarket created almost exact copies of its website, then told creators to simulate trades on those duplicate sites without disclosing they were being paid to do so.

The news led lawmakers to call for greater regulatory scrutiny into the company, according to a WSJ report later in the week.

Polymarket issued a statement to the news outlet saying it intended to conduct an audit of active promotional content.

The company also said it was “committed to maintaining accurate, fair, and transparent markets. We are part of a rapidly growing industry and are constantly evaluating ways to improve how we’re engaging and earning the trust of our audience.”

PYMNTS has contacted Polymarket and the CFTC for comment but has not yet gotten a reply.

The CNBC report characterized the investigation as a notable reversal of Polymarket’s fortunes. Though originally banned from the U.S., past probes by the CFTC and Department of Justice were dropped without charges last year.

The report added that this marks the first high-profile investigation into a prediction market company under the leadership of CFTC Chairman Michael Selig, who had until now been known for championing the industry.

Meanwhile, a report Saturday by CoinDesk said that Polymarket is also addressing a major security exploit that resulted in the theft of $3.1 million in PUSD tokens.

The breach, which affected 11 user wallets, was traced to a compromised third-party vendor that injected a malicious script into the platform’s frontend.

Blockchain intelligence firms reported that the stolen assets were taken from the Polygon network and immediately bridged to Ethereum. Polymarket has promised to provide full refunds to all victims holding its native PUSD collateral, the report added.