Polymarket Faces Possible Ban in France After Record Election Betting

French regulators investigate massive $3.5B trading volume on platform

Polymarket, a blockchain-based prediction platform, is under investigation by France’s National Gaming Authority (ANJ) following a record-breaking $3.5 billion in bets on the outcome of the 2024 U.S. presidential election. This surge in trading volume has led French regulators to scrutinize the platform’s operations as unlicensed gambling, potentially resulting in a nationwide ban.

The investigation comes in response to a high-profile win by a French trader, “Theo,” who placed large bets on Donald Trump’s victory and claimed $47 million in payouts. This win, along with increased trading activity, has raised concerns about the platform’s compliance with French gambling laws. According to ANJ officials, Polymarket’s event-based betting model places it firmly within gambling regulations, which require strict licensing for operations in France.

Polymarket saw its highest activity on Election Day, November 5, as $294 million flowed through the platform, with total open interest—a measure of all active bets—peaking at $463 million. This 40% increase from the previous week highlights the platform’s growth and influence, attracting users worldwide to place bets on various political outcomes.

Unlike conventional betting platforms, Polymarket operates on the blockchain, allowing participants to use cryptocurrency for placing bets without needing intermediaries or identity verification. While this structure facilitates global access, it also complicates regulatory oversight. If France moves forward with restrictions, measures could include blocking the platform’s domain and urging French media to avoid linking to Polymarket, although determined users may still access it via VPNs.

The investigation by ANJ follows initial market manipulation concerns, which were dispelled when Theo revealed his identity to the Wall Street Journal. Polymarket conducted an internal review and found no evidence of manipulation, concluding that Theo’s activity reflected genuine market interest rather than strategic tampering.

Further scrutiny came from blockchain analysis firms Chaos Labs and Inca Digital, who reported potential wash trading within Polymarket’s election market. Wash trading, where assets are repeatedly bought and sold to create artificial volume, raises questions about the integrity of markets and potentially misleads other traders. Polymarket has yet to comment on the findings.

The U.S. Commodity Futures Trading Commission (CFTC) has closely monitored prediction markets, including Polymarket, since 2021. The CFTC recently proposed new regulations aimed at reducing manipulation risks on platforms like Polymarket, which have grown in popularity for predicting election outcomes and other events. Due to regulatory limitations, Polymarket remains inaccessible to U.S. users, but it has attracted significant backing, including support from Ethereum co-founder Vitalik Buterin.

Polymarket’s performance in predicting electoral outcomes, including the likelihood of Trump’s victory, diverged from traditional polls, which continued to favor other candidates. While traditional polling methods missed key shifts in sentiment, Polymarket’s odds reflected the election results more accurately. In response to increased scrutiny, the platform is considering decentralizing its operations further, potentially through a token launch, which could change its current structure where Polymarket controls betting proposals.

French authorities argue that Polymarket’s activities effectively constitute gambling, limited to licensed operators. An ANJ official stated, “Betting on unpredictable events falls squarely under gambling law, and Polymarket is operating without a license.” If France proceeds with the ban, it may prompt a larger conversation on regulating blockchain-based prediction platforms globally.

photo source / Blockonome