Polymarket Faces CFTC Scrutiny After $10 Million Card Fraud Attempt

Fraudsters tried to steal at least $10 million from Polymarket's U.S. platform in February using stolen debit cards, the Wall Street Journal reported on Sept. 20.

Checkout.com, which processes card payments for the prediction market, at one point rejected more than 80% of the deposits it handled for Polymarket US as fraudulent. The industry norm is roughly 1%. Seven users drove most of the attempts, and one tried about 4,000 deposits.

Compliance Chiefs Resign After Warning Executives

The compliance team was surprised by the response from chief executive Shayne Coplan, who told staff to focus on growth and worry about regulatory fines later, people familiar with the company told the Journal.

U.S. compliance chief Andrew Clifford resigned in April after handing executives a detailed fraud report. Polymarket fired U.S. chief executive Justin Hertzberg, and the heads of its U.S. regulatory and anti-money-laundering teams also left.

The company had dropped a rule requiring customers to withdraw to the card they deposited from. Fraud rates returned to industry norms by May, after it capped how many cards one account can link.

A Signup Flaw Opens Nearly 500 Accounts

In late July, a registration flaw let anyone holding a customer's personal details, such as a stolen Social Security number, take over that account and its linked cards, without a password. Nearly 500 users were affected, and one saw almost $5,800 sent to an unknown debit card.

A spokeswoman said Polymarket would cover the lost money.

"Our market integrity framework includes processes to detect, review and respond to suspicious activity."

That was the company's statement to the Journal, which points to its published market integrity rules. An internal review by law firm Sullivan & Cromwell concluded Polymarket followed the rules. The Commodity Futures Trading Commission (CFTC) is investigating, and staff have been told to preserve records tied to the fraud.

The reports land weeks after Polymarket closed a $1 billion raise at a $21 billion valuation, a round FairGambling covered in August. Polymarket has not published a postmortem on the flaw, and the CFTC has not taken action as of writing.

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