French Regulator Investigates Polymarket After $3.5B Election Trading Volume

TLDR

• Polymarket faces potential ban in France following $3.5B in US election trading volume
• French trader “Theo” won $47M betting on Trump’s victory
• France’s ANJ investigating platform for unlicensed gambling concerns
• Platform hit record $463M open interest on Election Day
• Regulatory scrutiny increasing globally, including CFTC probe

The cryptocurrency prediction platform Polymarket faces a potential ban in France following unprecedented betting activity during the 2024 US presidential election.

The platform processed $3.5 billion in trading volume related to election outcomes, drawing attention from French regulators concerned about unlicensed gambling operations.

France’s National Gaming Authority (ANJ) is actively investigating Polymarket’s operations and compliance with French gambling laws.

The regulatory scrutiny intensified after a French trader, known as “Theo,” placed multimillion-dollar bets on Donald Trump’s victory, resulting in a $47 million payout when the former president secured his win.

The platform experienced its highest-ever trading activity on November 5, processing over $294 million in volume as users placed bets on various election outcomes.

Total open interest, representing the value of all active positions, reached a record $463 million on Election Day, marking a 40% increase from $329 million the previous week.

Polymarket operates differently from traditional betting sites by utilizing blockchain technology, allowing users to place cryptocurrency bets without intermediaries.

The platform’s structure enables participants to trade on event outcomes using digital currencies, making it accessible to a global audience.

The French regulator’s potential response could include blocking domain names and restricting access to the platform within France.

The ANJ may also pressure media outlets to stop linking to Polymarket, further limiting its reach in the French market. However, users might still access the service through VPNs since Polymarket only requires a crypto wallet rather than identity verification.

The massive wagers placed on the platform sparked initial manipulation concerns before Theo revealed his identity to the Wall Street Journal.

Theo4 on Polymarket

Polymarket reported conducting an investigation, which concluded that the trader was betting based on personal political views rather than engaging in market manipulation.

Two blockchain analysis firms, Chaos Labs and Inca Digital, identified potential wash trading within Polymarket’s US presidential betting market.

Wash trading involves buying and selling the same assets to create artificial market activity, which can mislead other participants.

The US Commodity Futures Trading Commission (CFTC) has maintained ongoing oversight of prediction markets since 2021. In May, the commission proposed new rules targeting these platforms to address manipulation risks.

Despite regulatory challenges, Polymarket has attracted substantial investment, including backing from Ethereum co-founder Vitalik Buterin, though it remains inaccessible to US users.

The platform demonstrated accurate predictive capabilities by correctly signaling both Biden’s withdrawal from the presidential race and Trump’s victory weeks before these events occurred. Currently, Polymarket maintains control over betting proposals, though this could change if the project moves toward decentralization through a token launch.

The company raised $74 million from early investors but faces mounting regulatory pressure globally. While prediction markets continue attracting billions in bets, concerns persist about insider trading effects and market manipulation risks.

Payouts following the US election are expected to reach approximately $450 million, with Polymarket showing divergence from conventional polls in the final days before the election. The platform indicated stronger odds for Trump’s victory compared to traditional polling data.

The ANJ has stated that Polymarket’s activities constitute gambling, which is only permitted by licensed operators in France. An ANJ insider emphasized that the platform essentially facilitates betting on uncertain outcomes, falling squarely within gambling jurisdiction.