Polymarket’s response to a major fraud campaign has raised questions about whether its rapid expansion kept pace with internal compliance controls.
The company faced a coordinated attack involving stolen debit cards and thousands of newly created accounts.
The incident came as Polymarket pursued aggressive growth and considered fundraising at a valuation of about $21 billion. It also added scrutiny to wider concerns over market integrity, regulatory oversight and prediction-market practices.
Stolen cards exposed weaknesses in Polymarket controls
The fraud campaign emerged in February after payment processor Checkout.com detected a surge in suspicious debit-card activity. Attackers connected stolen cards to thousands of accounts, placed wagers, and attempted to withdraw funds to accounts they controlled.
The Wall Street Journal reported that more than 80% of deposits faced rejection at the peak of the attack. That compared with an industry rate of roughly 1%, according to the report. The attempted theft reached at least $10 million, although Polymarket did not lose that amount.
Seven users accounted for most of the suspicious activity, with one user making nearly 4,000 deposits. As legitimate withdrawal requests increased, Polymarket changed its policy requiring withdrawals to return to the original funding source.
Some employees warned that removing the requirement could increase money-laundering risks. Executives reportedly responded that other internal controls could address those concerns.
The Journal also reported that CEO Shayne Coplan urged employees to continue expansion plans despite potential sanctions. Andrew Clifford, who led US compliance, later resigned after publishing an internal report about the fraud.
Polymarket also fired Justin Hertzberg, CEO of its US division, along with other executives overseeing regulatory compliance and anti-money-laundering policies. However, sources familiar with the findings said Sullivan & Cromwell concluded that Polymarket complied with applicable regulations.
Polymarket said it has since strengthened its controls. The company added risk personnel, including a former FBI agent, and hired former Amazon finance chief Warren Jenson as its first CFO.
It also limited the number of debit-card users it could link and brought in fraud-prevention firm Riskified. Polymarket said fraud rates returned to industry norms by May.
Prediction markets face wider integrity scrutiny
The fraud episode added to earlier concerns surrounding questionable trading activity on Polymarket. The New York Times reported that more than 80 accounts faced scrutiny over trades involving nearly 30 subjects.
In one cited case, 13 users wagered $140,000 on an Israeli military action against Iran. Those trades reportedly generated more than $600,000 in gains.
Regulatory scrutiny has also expanded. WIRED reported that CFTC Chairman Michael Selig authorized investigations involving Polymarket trades linked to Biden pardons, Iran contracts, and Google search results.
A US Special Forces soldier also faced accusations of using classified information to earn more than $400,000 from related bets. The CFTC has said trading on material nonpublic information can violate commodities law.
Meanwhile, Chainalysis said blockchain transparency can help authorities trace suspicious transactions and identify wallet connections.
Polymarket’s marketing practices have faced scrutiny as well. Senators John Curtis and Adam Schiff asked the CFTC on June 25 to investigate allegations involving paid creators and undisclosed promotions on lookalike websites.
JPMorgan closed Polymarket’s bank account in August over regulatory concerns, while the New York City Council opened a probe into prediction-market marketing.
The broader sector has also expanded rapidly. Prediction markets recorded $63.5 billion in volume during 2025, while Kalshi and Polymarket processed $52.7 billion during the first 86 days of 2026.
Intercontinental Exchange’s Polymarket stake reached about $1.6 billion, representing roughly 22% of the company. A Stanford-SMU study also linked Polymarket’s five-minute Bitcoin contracts with settlement-time order-flow spikes and sharp price reversals.
The study found retail traders absorbed most losses during those cycles, while the effect proved weaker on 15-minute contracts. These developments have placed greater attention on compliance as prediction markets expand into financial and crypto markets.
