CFTC Investigating Polymarket For Deceptive Marketing Practices

Accusations suggest that Polymarket was using college-aged influencers to celebrate fake wins

The deceptive marketing practices that Polymarket is being accused of undertaking involve the alleged staging of wins on social media. The prediction market site reportedly made us of college-aged online content creators. These online influencers would post videos of themselves celebrating wins on Polymarket that were not actual wins.

According to the Wall Street Journal report, the objective was to make the videos go viral and give off the impression to viewers that winning when trading on Polymarket's prediction market site is fast and easy.

The Wall Street Journal undertook the analysis of more than 1,100 TikTok videos from 10 creators. The objective was to determine whether the alleged winning in those videos was actually happening. What the investigation uncovered is that no, it was not.

The business periodical discovered that 118 videos, roughly 10% of the ones it analyzed, depicted creators winning almost $900,000. In reality, if they had placed identical bets, they would have lost more than $166,000.

The CFTC isn't even acknowledging that an investigation is ongoing

Despite the published reports, the CFTC has not even acknowledged that an investigation of Polymarket's marketing practices is currently underway.

Polymarket said in a statement that it is committed to transparency and fair 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," a Polymarket spokesperson said in a statement to CBS News. "As part of that commitment, we are conducting a comprehensive audit of active promotional content to ensure it complies with our standards, as well as applicable regulatory and legal disclosure requirements."

According to the Federal Trade Commission, "Federal law says that ad[s] must be truthful, not misleading, and, when appropriate, backed by scientific evidence."

Late last week, consumer protection firm Vaca Daffan Law filed a lawsuit against Blockratize, which operates Polymarket. Also named in the suit were Polymarker founder Shayne Coplan and chief marketing officer Matthew Modabber. The complaint alleges that the prediction market site "orchestrated a sweeping and flagrantly deceptive marketing campaign that lures Americans into risking real money while obscuring how likely people are to lose."

It was only earlier this year that the CFTC granted Polymarket a license to operate in the USA.  Polymarket was given a ban from the U.S. market in 2022. The site was accused of accepting U.S. customers when it wasn't licensed to do so.

Two U.S. Senators flagged Polymarket as a deceptive site

U.S. Senators Adam Schiff,  a Democrat from California, and John Curtis, a Republican from Utah, sent a letter to CFTC Chair Selig. In the letter, the Senators cited that the conduct revealed in the Journal’s investigation was "deeply troubling."  The warning they were issuing to the CFTC is that it may not be capable of policing what is increasingly looking like gambling.

"The public-facing behavior alleged here does not resemble a sober financial market designed for hedging or price discovery," Curtis and Schiff wrote in the letter.