Polymarket, the largest prediction market, could soon find itself in the crosshairs of US regulators amid reports that the company paid social media influencers to promote election betting on the site. Many of these influencers did not explicitly mention that Americans are banned from election betting on the platform.

For context, while Polymarket is based in the US, in 2022 the Commodity Futures Trading Commission (CFTC) fined the company accusing it of offering illegal trading services in the country. Polymarket settled with the CFTC by paying $1.4 million and agreed to stop offering its services in the US while continuing to do so abroad.

Polymarket Has Been in Controversies

Polymarket has been shrouded in controversies throughout what was one of the most polarized US elections in the nation’s history. Many traders on the platform were making massive crypto bets on Donald Trump becoming the US president. Notably, Trump wooed crypto enthusiasts and vowed to become the “crypto president” and build a national Bitcoin reserve.

Polymarket was forced to recheck the details of users after massive crypto bets were made on Trump returning to the White House. Incidental, a user named Fredi9999 alone bet $18 million on Trump which raised a lot of eyebrows.

Meanwhile, even as Polymarket cracked down on US-based users on the platform who were betting on the outcome of the election results, it seems the company was simultaneously promoting its services among them.

The platform doesn’t follow Know Your Customer or KYC regulations so many US citizens were able to get around the ban simply by using a VPN. Polymarket’s use of US social media influencers suggests that it knew this and wanted to attract US citizens to the platform despite its legal status.

Polymarket Paid Social Media Influencers

A Bloomberg report found that Polymarket paid several social media influencers based in the US to promote election betting on the site even though it was illegal for Americans to bet on the site. Messages seen by Bloomberg show that Armand Saramout, Polymarket’s senior director of growth, reached out to US influencers for sponsorships.

A Polymarket spokesperson confirmed that the company reached out to influencers but said that its objective wasn’t to seek US-based users on its platform.

“We’ve reached out to influencers on both sides of the aisle to promote our data and drive traffic and eyeballs to polymarket.com, where 99% of visitors consume news and never place a trade,” said the spokesperson.

However, it is difficult to buy the company’s argument especially as some of the influencers did not explicitly state that Polymarket is banned in the US while promoting the platform. For instance, one influencer who did not provide his name said that Polymarket did not ask them to tailor the content for audiences based outside the US. Also, they were not asked to provide a disclaimer about Polymarket not being legal for US-based users.

Also, contrary to the company’s claims about using influencers to increase traffic, some claim they were encouraged to increase “engagement and conversation.”

Polymarket’s Owner Is Also Spending Money on Election Ads

Polymarket owner Blockratize Inc. is also active in election ads and spent over $250,000 on election ads on Facebook and Instagram. These ads that featured Trump quite dominantly over Kamala Harris tell people “Don’t trust the polls — trust the markets.” The ads are as good an advertisement for Polymarket which has positioned itself as a leading platform to bet on the US elections.

Despite a clear bias for Trump in these ads, a spokesperson for Blockratize denied these allegations and said, “Any suggestion that Polymarket caters to a single party or demographic hasn’t been paying attention to the rapidly shifting market odds over the course of this campaign or to our distinctly nonpartisan and transparent approach to prediction markets.”

Meanwhile, it remains to be seen whether Polymarket’s approach to using social media influencers gets the company into regulatory crosshairs once again. However, the company seems to have tested the regulatory limits even as it scored a victory over regulators after rival Kalshi Inc. secured a court victory over the CFTC. In that order, Kalshi was allowed to begin offering local derivatives contracts to bet on the election.

Robinhood too capitalized on the craze among traders and launched contracts to bet on the US elections. “We believe event contracts give people a tool to engage in real-time decision-making, unlocking a new asset class that democratizes access to events as they unfold,” said the popular retail trading app on the product.

Why Betting on US Elections Looks Problematic

US elections have repercussions beyond the country’s borders and countries like Iran, Russia, and China have been accused of trying to influence the elections. Betting on the US presidential elections – which for all practical purposes elects the world’s most powerful person – is laced with all kinds of problems.

As CFTC chair Rostin Behnam noted earlier this year, “Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process.”

Many might confuse the betting odds on sites like Polymarket as being synonymous with polls – which they are not. For instance, Trump had a much higher odds of winning in Polymarket which was in contrast to the neck-to-neck race that polls showed. This could have suppressed turnout from prospective Harris voters who didn’t think that she could pull it out. Likewise, if the odds had Trump at 80% or 90%, that could have suppressed turnout from prospective Trump voters.

As John Aristotle Phillips who founded PredictIt, a project from Victoria University of Wellington in New Zealand that offers contracts on US election results says, “A market will give you the odds of an event happening.” Phillips adds, “It has nothing to do, and can’t give you insight, in terms of what the margin of victory or loss is going to be, which is what a poll is intended to show.”

Musk Called Upon Followers to Look at Betting Results

Incidentally, Elon Musk who emerged as one of the key Trump supporters termed election betting markets as “more accurate than polls, as actual money is on the line.” While the betting markets were right this time, they have been wrong many times in the past, such as in 2016 when they overwhelmingly supported Hillary Clinton until the very end.

Betting sites could potentially become a self-fulfilling prophecy with those betting on a candidate also voting for them to increase their odds of winning. Thomas Gruca, a marketing professor at the University of Iowa’s Tippie College of Business believes that betting platforms are not perfect and are prone to manipulation.

“When you don’t have limits, then it is the deep pockets which moves the prices,” said Gruca. He added, “Your opinion is weighted by the size of your cheque book.”