WASHINGTON, D.C. — Dennis Kelleher, President and CEO of Better Markets, issued the following statement in connection with sending a letter to the Commodity Futures Trading Commission (CFTC) regarding Polymarket’s reported acquisition of QCX, a newly approved CFTC registered entity:
“Days after the CFTC and Department of Justice (DOJ) dropped their investigations without explanation, the crypto betting platform Polymarket is reportedly reentering the U.S. market via its acquisition of QCX, an entity approved days ago by the CFTC after being dormant for more than three years. The sequence and timing of these events are highly suspicious and merit investigation. That is all the more so because this maneuver is similar to the strategy used by FTX and Sam Bankman-Fried (SBF) to avoid regulatory scrutiny by acquiring previously licensed registered entities. That was, of course, before FTX imploded into bankruptcy and SBF was arrested, convicted, and imprisoned for widespread criminal conduct. Needless to say, the lack of regulatory scrutiny in connection with the acquisition of registered entities can have grave implications.
“The timeline here tells an interesting story. Polymarket had been under investigation by both the CFTC and the Department of Justice for potentially violating its 2022 settlement with the CFTC, which prohibited it from offering binary options to U.S. users. That investigation was reportedly serious enough for the FBI to raid the home of Polymarket’s CEO and seize his phone and electronics. Yet in mid-July, after a change in administration, both agencies closed their investigations without explanation. At the same time, the CFTC quietly approved QCX’s application to become a registered exchange, even though its application had been dormant for more than three years. A few days later, Polymarket announced it had acquired QCX as a vehicle to relaunch its U.S. operations.
“The timing of these related and interconnected actions must be very carefully scrutinized. For example, did personnel at the CFTC or other government bodies secretly collude with Polymarket to drop the investigations and/or expeditiously approve QCX? While the CFTC may not have the authority in the ordinary course to review acquirors of registered entities, it would not seem consistent with its statutory mandates to take such actions if such actions were taken to enable a private entity to avoid regulatory scrutiny. At the least, this is an indefensible regulatory loophole that should have been closed in the wake of FTX’s collapse, not an instruction manual for others to follow, possibly with the help of the CFTC itself.
“In light of its prior conduct and the suspicious timeline of actions here, Polymarket should not be allowed to use its acquisition of QCX as a backdoor avenue to resume gambling in the U.S. on elections and sports without any regulatory scrutiny.”
The Letter to the CFTC is available here.
###
Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
