Polymarket, one of the largest prediction-market operators, is confronting deepening fraud and compliance concerns as it advances toward a potential initial public offering, according to the Wall Street Journal.
In February, fraudsters exploited stolen debit cards linked to thousands of accounts on the platform's U.S. operation, attempting to siphon at least $10 million. At its worst, more than 80% of deposits processed through payment partner Checkout.com were rejected as fraudulent, compared with a typical industry rate of around 1%.
Polymarket responded by capping the number of debit cards users could connect and hiring antifraud contractor Riskified. Fraud rates receded to near-normal levels by May, the WSJ reported.
A separate incident emerged in July, when an engineering flaw left nearly 500 users vulnerable to an attack that exploited stolen personal information to access accounts and link payment methods. The company said it would cover affected users' lost funds.
The timing of the attacks has raised questions about whether rapid expansion ahead of an IPO contributed to lapses in risk management. Current and former employees told the WSJ that compliance staff had raised concerns with CEO Shayne Coplan, who allegedly replied that the company should continue growing and simply pay any regulatory fine if one came down.
Polymarket has moved to bolster its compliance infrastructure, hiring Warren Jenson, formerly Amazon's finance chief, as its first CFO.
CEO Shayne Coplan is now seeking approximately $1 billion in new funding at a valuation of roughly $21 billion. Donald Trump Jr.'s investment firm, 1789 Capital, is contributing about $300 million to the round, while Intercontinental Exchange disclosed in July that it had invested $1.6 billion for a 22% stake.
Regulatory scrutiny is intensifying. The Commodity Futures Trading Commission is investigating Polymarket, and employees were instructed to preserve records related to the February fraud incident and other matters. The company also faces lawsuits challenging its business practices and unresolved legal questions over whether prediction markets amount to unlicensed gambling in certain states.
Polymarket said it maintains systems to detect and respond to suspicious activity and remains committed to fair and transparent markets.
