In January 2022, the US Commodity Futures Trading Commission settled with Polymarket for $1.4 million. The settlement required Polymarket to shut down its US operations and prevent American users from accessing the platform. The CFTC’s position was clear: Polymarket’s event contracts qualified as “swaps” under US law, and the platform had been operating an unregistered exchange.
Polymarket complied — sort of. The platform implemented IP-based geo-blocking to prevent US users from accessing the site. But anyone with a VPN could easily bypass the block. There was no KYC requirement. There was no way to actually verify a user’s nationality. The geo-block became a legal fiction that everyone — Polymarket, the CFTC, and US users — quietly agreed to maintain.
For the next two years, this uneasy truce held. Polymarket grew, US users continued to participate (despite the geo-block), and the CFTC didn’t take additional action. The platform existed in a regulatory gray zone where everyone knew the rules were being technically violated but no one was enforcing them. The 2024 election put pressure on this arrangement. As Polymarket’s volume grew, so did the visibility of its US user base.
The 2022 settlement set the stage for the November 2024 raid. The legal ambiguity that had allowed Polymarket to grow also created the conditions for federal action when the political moment changed. Future on-chain prediction market operators studied the settlement carefully. The lesson was that complying with US regulators meant either fully restricting US users (with hard KYC) or fully accepting the risk of future enforcement. There was no middle path that could survive long-term.
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