Two U.S. senators are demanding answers from the financial regulator about deceptive marketing by Polymarket, a prediction market platform where people bet on real-world events. The issue: Polymarket paid social media creators to make videos appearing to show live trades on their platform, but the trades were fake, filmed on lookalike websites designed to trick viewers.

In 70% of these videos, the creators appeared to be placing bets on the fake sites, not Polymarket itself. The campaign targeted U.S. audiences, even though Polymarket is legally prohibited from operating in America.

Polymarket was already in trouble with regulators. In 2022, the Commodity Futures Trading Commission (CFTC)—the agency that oversees derivatives and prediction markets—forced Polymarket to shut down U.S. operations. The CFTC found that Polymarket had been running an unregistered market. That's the regulatory equivalent of operating a stock exchange without a license. Polymarket agreed to close, but the CFTC didn't impose ongoing supervision or monitoring after that.

Why This Matters Beyond Just Ads

The deceptive videos are one problem. But the bigger issue is something regulators have been worried about for years: insider trading.

Prediction markets are different from stock markets. When you bet on something like an election or a Supreme Court ruling, you're betting on real events where some people have inside information. If a congressional candidate bets on their own election, they have an unfair advantage—they know things about their campaign that public voters don't. The CFTC caught exactly this happening in April 2026, when it fined three congressional candidates for betting on their own races on a platform called Kalshi.

Kalshi is regulated and overseen by the CFTC. Polymarket, by contrast, has no registration and no supervisory layer watching for insider trading or other problems. That's the core vulnerability senators are flagging.

The deceptive marketing and the unregistered-exchange problem are separate legal issues, but they add up. A platform that staged fake videos to manipulate Americans into thinking it was real, while operating outside U.S. jurisdiction and without oversight of insider-trading risks, presents multiple layers of regulatory exposure.

The Broader Pattern

Polymarket is not the only prediction market under fire. In late 2024, Congress also questioned Robinhood—the retail trading app—about offering election betting to regular customers without clearly explaining the risks.

The throughline is that prediction markets have grown much faster than regulators have built rules to oversee them. The CFTC only approved regulated election betting on Kalshi in 2024 after years of legal fights. The agency is still figuring out its full approach to these markets. Meanwhile, platforms and brokers are already scaling up to millions of retail users. That gap between what's technically allowed and what's actually supervised is what Congress is trying to close by pressing the CFTC on Polymarket.