Woofun AI reports that the U.S. Commodity Futures Trading Commission has initiated a comprehensive investigation into Polymarket, targeting the decentralized prediction market platform. The regulatory probe stems directly from a Wall Street Journal report alleging that the platform compensated creators to generate and distribute fraudulent betting videos. Authorities are now examining the firm's adherence to current regulations, the nature of its promotional campaigns, and the robustness of its internal control mechanisms.

This enforcement action arrives shortly after Polymarket resolved a prior legal dispute in 2022 with a $1.4 million settlement for offering illegal off-exchange commodity options. The platform facilitates wagering on real-world event outcomes using cryptocurrency and experienced substantial user growth, particularly throughout the 2024 U.S. election cycle. Despite this expansion, the CFTC maintains that numerous prediction market contracts legally constitute commodity options or swaps under its jurisdiction.

The outcome of this investigation could set a precedent for how other decentralized platforms are regulated and influence whether prediction markets can operate legally in the U.S.