Republican Representative James Comer of the House Committee on Oversight and Government Reform has announced an investigation into prediction market platforms Kalshi and Polymarket. This probe was prompted by allegations of insider trading and exploitation of regulatory loopholes. Comer specifically questioned Polymarket's promotional tactics, citing a Wall Street Journal investigation that revealed the platform paid social media influencers to create fake videos showcasing large winnings and simulated trades on replica websites. These videos, which aimed to attract U.S. users, generated over 140 million views across platforms like TikTok and YouTube.
The Wall Street Journal investigation alleged that Polymarket constructed dummy versions of its website, such as "poiymarket.com," for influencers to stage bets. A review of 1,105 videos from 10 creators showed that none of the approximately $1.9 million in displayed wagers were real. Furthermore, 118 videos celebrating fabricated wins totaled nearly $900,000, which, if real, would have resulted in losses exceeding $166,000. Influencers were reportedly paid $2,000 to $3,000 per month and instructed not to disclose their paid partnership with Polymarket, with some only adding disclosures after the Journal's inquiries.
The focus on U.S. audiences is particularly significant because Polymarket has been barred from offering its main exchange to Americans since a 2022 settlement with the Commodity Futures Trading Commission (CFTC). The CFTC had previously fined Polymarket $1.4 million for operating an unregistered market. Despite these restrictions, the company's marketing campaign, managed by Virality, specifically targeted U.S. users, with creators only getting paid if at least 60% of their audience was U.S.-based. This raises legal concerns under commodities law, which prohibits deceptive marketing, especially given that a separate Journal analysis found most Polymarket users actually lose money.
The House committee's investigation will scrutinize the adequacy of safeguards to prevent access to offshore sites and ensure compliance with U.S. federal regulations. Comer's letter to Kalshi CEO Tarek Mansour requested information on identity verification, geographic restrictions, and monitoring for insider trading. The concerns extend to potential exploitation of prediction markets by individuals with access to sensitive national security information, as highlighted by a federal indictment against a U.S. Army Master Sgt. who allegedly used classified information to profit $409,000 on Polymarket. Polymarket has stated it is committed to transparency and is auditing its promotional content but did not directly address the Journal's specific allegations.
