Polymarket’s Alleged Fake Trades Don’t Justify a Crackdown on Prediction Markets

A recent investigation by The Wall Street Journal found that the prediction market Polymarket paid social media creators and influencers to promote $1.9 million in fake positions as part of its marketing strategy to lure American users to the platform.

To fool viewers, Polymarket built copies of its website with domain names like “poiymarket.com,” where paid promoters could create ads of fabricated trades that the company’s marketing partner then disseminated. Promoters were selected based on the size of their U.S. audience, with Polymarket providing “bullet-point guidance” on content, according to the Journal.

In 118 of the 1,105 videos reviewed by the Journal, creators falsified “almost $900,000” in winning contracts. One influencer, a college student named George Makihara, reportedly wagered nearly $410,000 in fake trades from January to mid-May as a paid promoter for Polymarket without identifying his affiliation with the company.

One of these trades allegedly happened in January, when Makihara posted a video of himself “purchasing” $1,000 in fake shares under a contract that paid out if President Donald Trump publicly said the word McDonald’s during the month. Since the president did not publicly say McDonald’s in January, the accounts that purchased positions on that contract on Polymarket’s actual U.S. platform all lost. With a real contract, Makihara would’ve been out his $1,000. Instead, he posted a video reacting to a supposed win on the position that resulted in a $100,000 payout.

The platform’s marketing strategy, which is a remarkable own goal for a company operating in an industry lawmakers are already trying to regulate more stringently, appears to be an attempt to catch up to the competition. After Polymarket acquired a licensed U.S. exchange last July, the Commodity Futures Trading Commission (CFTC)—the federal agency that regulates prediction markets—approved its operations in the country in November. However, under its 2022 agreement with the CFTC, U.S. users are still prohibited from accessing Polymarket’s offshore exchange. The restrictions enabled other prediction markets to capture a larger market share, while Polymarket saw its trading volume decline.

Now, it appears the company is seeking to make up for ground lost to competitors such as Kalshi, Robinhood, and Crypto.com with a deceitful marketing campaign that relies on streamers, creators, and a host of internet-savvy people known as “clippers” who redistribute the content.

The episode will likely increase calls to regulate prediction markets, which currently operate in a regulatory gray area. On Monday, Sen. Richard Blumenthal (D–Conn.)—a vocal critic of prediction markets—posted on X that if this were “any other Administration, the DOJ, CFTC & FTC would be shutting down” Polymarket. However, the company is unlikely to face any discipline from the CFTC, since the allegedly fabricated trades occurred outside its regulated U.S. platform.

To date, the Trump administration and CFTC have largely taken a hands-off approach to regulating the prediction market industry. Still, allegations that a leading prediction market engages in deceptive advertising practices seem a surefire way to erode what little support the industry has. There are already over a dozen bills circulating in Congress to restrict the types of contracts offered by prediction markets and regulate the industry writ large.

While the CFTC may not act, Polymarket could soon hear from another federal regulator. The scheme appears to violate the Federal Trade Commission’s (FTC) truth-in-advertising principles under Section 5 of the Federal Trade Commission Act, which requires anyone endorsing a product to disclose any affiliation with the company. The FTC chose not to comment on the Journal‘s findings, alluding to “potential investigations” into the matter.

Yet there’s little need for regulators to step in where the market can act. Polymarket has been embroiled in a string of recent controversies that are likely to erode user trust in the platform. Recently, the company has drawn scrutiny for its settlement of contract markets and its policies on insider trading, components that govern fairness for any prediction market. The Wall Street Journal’s investigation also pointed to “at least 19 videos” in Polymarket’s ad blitz that discussed “opportunities to use inside information or other tactics to manipulate markets,” opportunities that would violate the company’s own integrity policies.

The entire premise of a prediction market is that the price of a contract reflects independent information, free from manipulation. If there’s no user confidence in the market, the platform loses its ability to provide meaningful information.

It’s easy to say, as former Polymarket creator Razeen Khan told the Journal, that the fabricated trades in Polymarket’s marketing campaign are like “fast-food commercials” or simply “depicting what actually happens,” but there’s a key difference. Fast food may appear more appealing in commercials, but the product is still readily available for purchase. In contrast, Polymarket’s ads depicted fake outcomes promoted as authentic trades.

There’s a wealth of information available for users to decide whether Polymarket is trustworthy. Regulating the entire industry over the questionable practices of one company would be an overreaction to an event that the market will likely correct for.