Polymarket, a leading prediction market platform, has reportedly initiated discussions with the U.S. Commodity Futures Trading Commission (CFTC) to lift a four-year prohibition on American users of its primary on-chain exchange. Bloomberg first reported these negotiations. If approved by the commission, this move would mark the first time since Polymarket’s 2022 settlement that its main exchange is accessible to U.S. residents.
In 2022, an enforcement action targeted Blockratize Inc., Polymarket’s parent company, for operating an unregistered platform allowing users to trade contracts based on real-world events. This resulted in a $1.4 million penalty and the closure of those markets to U.S. citizens.
The prediction market sector has since gained traction within mainstream finance, prompting the CFTC, which had previously restricted Polymarket, to reconsider allowing its main exchange back into operation. This platform settles trades using stablecoins on the Polygon blockchain. Previously, in November last year, the CFTC approved a separate U.S.-based product through brokerages following the company’s $112 million acquisition of QCX, a regulated exchange. However, this Polymarket US platform has been limited to beta testing with sports-focused trading.
Throughout the past year, CFTC Chairman Michael Selig has actively supported prediction markets both in court and publicly. In February, he pledged to challenge states attempting to regulate these markets through an amicus brief supporting Crypto.com. A month later, the agency issued guidance on event-contract compliance and sought public input on sector governance.
Earlier this month, Selig cautioned against pushing prediction markets offshore, likening it to potential FTX-style collapses, and emphasized the necessity for platforms to register and operate under U.S. regulations. Currently, with four of five commissioner positions unfilled, the decision rests solely with Selig.
In a comprehensive interview with @ChairmanSelig of the CFTC, various topics were discussed including his background in crypto and prediction markets.
“Concentrating power within the CFTC sets a fragile precedent,” noted Dominick John, an analyst at Zeus Research. He warned that one commissioner’s decision could legitimize on-chain prediction markets without broad consensus, potentially heightening uncertainty and policy reversals, thereby weakening long-term policy stability.
Should Polymarket’s main exchange reopen to U.S. users, it would offer retail traders improved access and liquidity, albeit with stricter regulatory oversight aligning the markets more closely with traditional finance (TradFi), John added.
Julian Tuerling of xⁿ Research suggested that a USDC-collateralized exchange on Polygon could become the first crypto-native platform within U.S. federal derivatives regulations. This development might settle debates over whether on-chain infrastructure fits into conventional regulatory frameworks, he noted.
With a user base leaning toward crypto natives, expectations would rise for an experience similar to platforms like Robinhood or Draftkings. Polymarket would need to balance maintaining its on-chain characteristics with the abstraction of certain features, Tuerling added.
“Lifting the 2022 ban is not mere housekeeping,” remarked Yuriy Brisov, a partner at Digital & Analogue Partners. He warned that future commissions could revisit decisions made by Selig acting alone. If this decision occurs soon, it would coincide with an ongoing jurisdictional dispute and signify the agency choosing a winner before judicial rulings.
For U.S. users, “the cumbersome alternative route disappears,” Brisov noted, eliminating the need for domestic platforms or VPN workarounds that previously led to federal charges in the Maduro insider-trading case.
Decrypthas reached out to Polymarket and the CFTC for comments and will update this article if responses are received.