Topline
Controversial billionaire political donor Peter Thiel and ethereum founder Vitalik Buterin raised about $70 million in funding for Polymarket, one of the major cryptocurrency startups offering “event contracts” for users to bet on things like political elections—despite the threat of impending federal regulation for election gambling.
Peter Thiel’s Founders Fund is one of the lead investors in Polymarket, the company said on Tuesday.
Key Facts
Polymarket, one of the most popular online prediction markets, allows users to bet on the outcomes of real-world events—everything from the number of times Elon Musk tweets in a week to whether or not Taylor Swift will get engaged in 2024 through “event contracts.”
Gamblers have already staked over $125 million on the 2024 presidential election on Polymarket—which lists former President Donald Trump as the favorite over President Joe Biden, with a 49% of winning.
Founders Fund, the venture capital firm founded by Thiel that also invested in SpaceX and Facebook, was the lead investor, Polymarket founder Shayne Coplan told CoinDesk.
Polymarket did not immediately return a request for comment from Forbes.
Several other startups also offer similar event contracts, including PredictIt and Kalshi—a New York-based startup that became the first of these companies to receive approval from federal regulators to operate a contract market in 2020.
What Is The Legal Status Of Election Betting?
Polymarket essentially operates as an offshore betting platform out of the purview of U.S. regulations. Betting on elections is illegal in the U.S. under federal law, but many companies have lobbied the Commodity Futures Trading Commission in recent years to ease the restrictions. Federal regulations already ban event contracts related to war, terrorism, assassination, activity that is unlawful under any federal or state law, and a broader “gaming” category. On Friday, the CFTC voted 3-2 in favor of adopting new rules that would ban event contracts that are “contrary to the public interest”—which would explicitly include political contests. Under the new rules proposed by the CFTC, political elections would fall into the “gaming” category. The new regulation will not take effect until the CFTC has posted a final version of the new rules for public review—which could be months in the future. PredictIt, another predictive market competitor that offered bets on the 2020 presidential election, operates in the U.S. under a no-action letter issued in 2014—which allows it to operate as a “data-gathering tool for academic researchers,” according to court filings. Kalshi, the only predictive market currently approved by the CFTC, does not offer bets on elections—but does offer bets on some government-related events like the Federal Reserve raising interest rates.
Key Background
Polymarket and other predictive markets have already received considerable regulation and pushback from lawmakers in the past few years. In January 2022, Polymarket was forced to pay a $1.4 million civil penalty as part of a legal settlement with the CFTC, which also required the company to “wind down” U.S. markets that did not comply with the Commodity Exchange Act. Regulators found the company was operating an “illegal unregistered or non-designated facility for event-based binary options online trading contracts” since 2020. The CFTC said Polymarket offered “substantial cooperation” with regulators during the investigation, resulting in a lower fine than what it could have received. Kalshi, which received landmark approval by the CFTC in 2020, also tried to expand into political election markets last year, asking the agency to approve event contracts for the question of what party would win control of Congress. Kalshi’s request was met with significant pushback from legislators, including Sen. Chris Van Hollen, D-Md., Sen. Jeff Merkley, D-Ore., and Sen. Elizabeth Warren, D-Mass. According to a letter sent by the senators, approving Kalshi’s request would “profoundly undermine the sanctity and democratic value of elections. Introducing financial incentives into the elections process fundamentally changes the motivations behind each vote, potentially replacing political convictions with financial calculations.” Kalshi’s request was eventually denied.
Forbes Valuation
We estimate Thiel’s net worth at $6.9 billion, a fortune he made as the co-founder of PayPal and security firm Palantir. He was also a notable early investor in Facebook, but has since sold most of his shares in the social media giant.