Author: EX.IO Research Institute, Digital Asset Financial Technology Group

This is not a victory of a single platform, but a reaffirmation of an industry-level law: all new tracks with real value—whether in crypto finance or other industry-native innovations—will eventually be incorporated into a compliance framework. The difference lies only in whether to actively embrace it or be passively absorbed.

1. Prologue: When "Heroes of Liangshan" Meet the Court's Invitation

In "Water Margin," Song Jiang leads one hundred and eight heroes to gather at Liangshan Marsh, robbing the rich to help the poor and upholding justice, yet always faces an ultimate choice—should he continue to be a good man "acting on behalf of heaven" in the mountains, or accept the court's invitation in exchange for a letter of amnesty?

This thousand-year-old story is being precisely replicated in the crypto world.

In the second half of 2025, the decentralized prediction market platform Polymarket acquired the CFTC-licensed derivatives exchange QCX for $112 million, subsequently receiving a "no-action" letter from the U.S. Commodity Futures Trading Commission (CFTC), formally transforming from a "grey-area crypto-native platform" into a "compliant financial institution under federal regulation." This turnaround came just three and a half years after it was fined $1.4 million by the CFTC and expelled from the U.S. market.

Polymarket's "invitation" path mirrors the complete transformation of the entire crypto prediction market track from "lawless wilderness" to "sacred halls."

2. The "Previous Life" of Prediction Markets: From Academic Experiment to Business Exploration

To understand Polymarket's story, one must return to the academic origins of prediction markets.

In 1988, three economists from the University of Iowa complained in a bar in Iowa City—Jesse Jackson's unexpected victory in the Michigan Democratic primary caught all polling organizations off guard. They came up with a bold idea: if there were an "election market" where participants could express their expectations for political outcomes with real money, could the prices reflect reality more accurately than polls?

This idea gave rise to the Iowa Electronic Markets (IEM), the pioneering work of modern prediction markets. IEM utilized real funds (with a cap of $500 for each trader), trading contracts based on real events. Notably, between 1988 and 2004, IEM's prediction accuracy exceeded that of traditional polls 74% of the time. A study comparing 964 polls with concurrent market prices showed that the absolute average error of polls was 3.37 percentage points, while market predictions were only 1.82 percentage points.

The success of IEM sparked a wave of commercialization. Around 2001, Ireland's InTrade and TradeSports were established one after another, pushing prediction markets to the masses. InTrade gained fame during the 2008 and 2012 U.S. presidential elections when The New York Times cited its data 68 times in a year. By the time of the 2012 election, the platform had over 82,000 users, with betting amounts exceeding $200 million for that election alone. However, on November 26, 2012, the CFTC filed a lawsuit against InTrade for "providing options trading to U.S. users without approval," and the platform was forced to shut down in March 2013. In 2018, a federal court ordered InTrade to pay a $3 million civil penalty.

The demise of InTrade left a profound lesson: in the U.S., prediction markets that do not reconcile with the regulatory framework are doomed to fail. Subsequently, in 2014, PredictIt received a "no-action letter" exemption from the CFTC under academic protection from Victoria University in Wellington, New Zealand, but with a per person, per contract investment cap of only $850. In August 2022, the CFTC revoked this exemption, and PredictIt chose to sue the regulatory agency.

In the crypto world, Augur debuted as the first decentralized prediction market protocol based on Ethereum in 2018, proposing a vision of "permissionless, on-chain trading." However, constrained by high Gas fees on Ethereum L1 (transaction costs could reach $5-50) and poor user experience (users needed to run their own Ethereum nodes), Augur's daily active users quickly plummeted from around 265 to less than 30 after launch.

The "first half" of prediction markets thus outlines a clear picture: academically valid, commercially challenged, and regulatory pressure. This track needs a breakthrough player that can solve user experience issues while finding a compliance path.

3. Polymarket's "Wild West Era": From Bathroom Startup to FBI Knock on the Door

In June 2020, 21-year-old NYU dropout Shayne Coplan built a website in his apartment's "temporary bathroom office." At that time, the COVID-19 pandemic was sweeping the globe, and the world was filled with uncertainty—When would the vaccine be available? When would the lockdown end? Who would win the presidential election? Coplan keenly realized that people needed a place to distill "the various uncertainties" into "tradeable price signals."

Thus, Polymarket was born. Unlike Augur, Coplan chose Polygon (Ethereum L2) as the underlying infrastructure, reducing transaction costs to nearly zero. Additionally, Polymarket settled in USDC stablecoin and simplified the user experience significantly by supporting credit card deposits via MoonPay. These product design decisions allowed Polymarket to achieve a significant improvement in user experience over its predecessors.

During the 2020 U.S. presidential election, Polymarket's trading volume quickly soared, with a single-day volume of $1.297 million on November 3. The platform's accurate prediction of Biden's victory attracted the attention of crypto opinion leaders like Vitalik Buterin. By 2021, Polymarket completed a $4 million seed round led by Polychain Capital, followed by a $25 million Series A round led by General Catalyst.

However, the strategy of "building the platform first and seeking compliance later" faced severe backlash in 2022.

On January 3, 2022, the CFTC initiated enforcement action against Polymarket, alleging that it offered event-based binary options contracts to U.S. customers without registration. The CFTC determined that each "yes/no" event market on Polymarket essentially constituted a swap, which could only be traded on registered exchanges or swap execution facilities under the Commodity Exchange Act. CFTC Enforcement Division Acting Director Vincent McGonagle emphasized in a statement: "All derivatives markets must operate within the legal framework, regardless of the technology used, including so-called decentralized finance."

Ultimately, Polymarket reached a settlement with the CFTC: paying a $1.4 million civil penalty, promising to shut down all non-compliant markets by January 14, 2022, and prohibiting all U.S. users from accessing the platform.

For Polymarket, the fine itself was not a deadly blow; the real cost was that it lost access to the largest financial market in the world—the U.S. Afterwards, Polymarket refused U.S. users entry through geographic blocking, but according to Similarweb data, in 2024, 25% of website traffic still came from the U.S., and users bypassing the restrictions via VPNs had become an open secret.

4. 2024 Election: The Highlights and Darkest Moments of "Claiming the Mountain"

The moment Polymarket truly "broke out" occurred during the 2024 U.S. presidential election.

In January 2024, Polymarket launched the "2024 U.S. Presidential Election Winner" market, rapidly igniting a trading frenzy. As the election intensified—with Trump being assassinated and Biden unexpectedly withdrawing—the platform's attention and trading volume surged exponentially. In November 2024, the monthly trading volume hit a record high of $2.63 billion; the cumulative trading volume for the year exceeded $9 billion, with active traders peaking at 314,500 in December. Throughout the election cycle, the total amount wagered on the presidential election on Polymarket was nearly $3.7 billion.

Even more notably, Polymarket's prediction accuracy surpassed that of traditional polls. While most polling organizations showed a tight race, Polymarket's platform prices consistently indicated Trump leading. A French "whale" trader wagered tens of millions of dollars on the platform betting on Trump winning, reportedly netting $85 million.

However, the highlight moment quickly faded.

On November 13, 2024, in the early hours, FBI agents knocked on Coplan's door at his Manhattan apartment, seizing his phone and electronic devices. The U.S. Department of Justice and the CFTC jointly launched an investigation, with the core question being whether Polymarket violated the 2022 settlement agreement by secretly accepting bets from U.S. users.

Coplan himself was not arrested or charged. He responded on X in a trademark Gen Z tone: "New phone, who dis?"—implying his old phone had been confiscated. Polymarket issued a statement claiming the raid was "an apparent political retaliation by the outgoing government."

From "claiming the mountain" to "the court's encirclement," Polymarket's situation is remarkably similar to the heroes of Liangshan Marsh—the greater the momentum, the more dangerous the attention drawn.

5. The Path to Compromise: $112 Million for a "Letter of Amnesty"

The turning point occurred in July 2025.

With the Trump administration in place, the U.S. regulatory environment for cryptocurrencies underwent a fundamental shift. On July 15, 2025, the U.S. Department of Justice and the CFTC simultaneously announced the termination of their investigation into Polymarket, with no charges or additional penalties filed.

Three days later, Polymarket dropped a "bombshell": it acquired QCX LLC and its associated clearing house QC Clearing LLC for $112 million. QCX was a previously little-known entity, whose founder, Sergei Dobrovolskii, had begun applying for a DCM (Designated Contract Market) license four years prior and received formal CFTC approval on July 9, 2025. Through this acquisition, Polymarket gained a complete CFTC exchange and clearing license, bypassing the typically multi-year independent application process.

Coplan announced in the acquisition announcement: "Now, by acquiring QCX, we are laying the foundation for Polymarket's return to the U.S. market—as a fully regulated and compliant platform that allows Americans to trade their views."

In September 2025, the CFTC issued a "no-action" letter to Polymarket’s newly acquired exchange department, lighting the green light for its legal provision of prediction market services in the U.S. In November 2025, the CFTC further issued a revised designated order allowing Polymarket to operate as a federal-regulated matching trading platform in the U.S.

Polymarket's "compromise" strategy is quite ingenious—rather than spending years starting from scratch to apply for licenses, it's better to directly buy a ready-made "letter of amnesty." This "shell licensing" path is becoming an increasingly popular choice for many projects in the crypto industry.

6. Change of Leadership: A Historic Shift in Regulatory Attitude

Polymarket's successful "compromise" cannot be separated from the "court's" own attitude transformation.

In May 2024, during the Biden administration, the CFTC passed a proposal with a 3-2 vote to ban the trading of event contracts related to elections, sports events, or award competitions. Then CFTC Chairman Rostin Behnam warned that allowing such contracts would make the CFTC act as "election police."

However, in February 2026, newly appointed CFTC Chairman Michael S. Selig announced the formal withdrawal of this proposal. Selig stated: "The 2024 event contract proposal reflected the previous government’s hasty regulatory decision to implement a complete ban on political contracts before the presidential election."

Almost simultaneously, SEC Chairman Paul Atkins indicated in his testimony before the Senate Banking Committee on February 12, 2026, that there may be "overlapping jurisdiction" between the SEC and CFTC concerning prediction markets, stating, "I believe we have sufficient authority" to regulate certain products in prediction markets. Atkins pointed out: "Prediction markets are exactly the kind of areas that might have overlapping jurisdiction, and this is a significant issue that we take very seriously."

More symbolically, in February 2026, the CFTC announced the establishment of an Industry Advisory Committee (IAC), with Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour both being appointed. This appointment has been interpreted externally as a symbolic act of the CFTC "inviting" the prediction market industry in a systemic way.

The 180-degree turnaround in regulatory attitude provided indispensable political soil for Polymarket's compliance transformation.

7. From "Acting on Behalf of Heaven" to "Seeking Fame": An Epistle

Polymarket's "compromise" story offers profound compliance insights for the entire crypto industry.

First, real value is a bargaining chip. The core reason Polymarket was able to move from penalty and expulsion to being incorporated lies in its demonstration of the information aggregation value of prediction markets. In 2025, the entire prediction market industry reached a trading volume of $63.5 billion, a fourfold increase over 2023. The parent company of the New York Stock Exchange, ICE, announced in October 2025 plans to invest up to $2 billion in Polymarket (valued at approximately $9 billion), becoming its exclusive institutional data distributor. In March 2026, ICE completed the final $600 million delivery of this investment commitment. What ICE valued was precisely the potential application of Polymarket's event-driven data in the institutional investment realm.

Second, there is more than one compliance path. Kalshi chose to "take a frontal approach"—founders Luana Lopes Lara and Tarek Mansour spent nearly three years communicating repeatedly with the CFTC after graduating from MIT, becoming the first event contract exchange to receive a CFTC DCM license in November 2020. Polymarket, on the other hand, took the shortcut of "shelving licensing"—acquiring a licensed entity for $112 million. Both paths lead to the same destination, confirming the feasibility of integrating crypto-native innovations with traditional financial regulatory frameworks.

Third, "compromise" does not equal "laying down arms." After obtaining a CFTC license, Polymarket still retains its crypto-native gene—on-chain settlement, USDC valuation, global liquidity. It is no longer "the bandits of Liangshan Marsh," but it has not turned into "the compliant subjects of the court." This posture of "dancing with shackles" may be the most realistic survival strategy for the crypto industry in the regulatory era.

Conclusion

At the end of "Water Margin," Song Jiang leads the heroes of Liangshan to accept the invitation, launching campaigns northward against the Liao Kingdom and southward against Fang La, ultimately ending in the tragic fate of "the rabbit dies and the dog is cooked." But Polymarket's story may not repeat this fate—because the prediction markets it represents have evolved from an "interesting crypto toy" to a financial infrastructure recognized by mainstream institutions like the New York Stock Exchange, CNN, and Bridgewater.

When the CFTC's No-Action Letter and ICE’s $2 billion check are both on the table, and when the SEC chairman and CFTC chairman discuss the jurisdiction of prediction markets on Capitol Hill, this industry is no longer a "grey gambling space."

This is the first chapter in the crypto market's compliance epistle—and Polymarket is the first to be "invited" like "Song Jiang."

References

[1] PR Newswire. (2025-07-21). “Polymarket Acquires CFTC-Licensed Exchange and Clearinghouse QCEX for $112 Million.” https://www.prnewswire.com/news-releases/polymarket-acquires-cftc-licensed-exchange-and-clearinghouse-qcex-for-112-million-302509626.html

[2] Quadcode Group. (2025-07-24). “Quadcode Group Completes $112 Million Sale of QCEX to Polymarket.” https://quadcode.com/blog/quadcode-group-completes-112-million-sale-of-qcex-to-polymarket

[3] Crypto Times. (2026-04-29). “Polymarket USD, CTF V2: How Prediction Markets Turn Institutional.” https://www.cryptotimes.io/learn/polymarket-usd-ctf-v2-how-prediction-markets-turn-institutional/

[4] CFTC. (2022-01-03). “CFTC Orders Event-Based Binary Options Markets Operator to Pay $1.4 Million Penalty.” https://www.cFTC.gov/PressRoom/PressReleases/8478-22

[5] Mick Bransfield. (2024-01-18). “The last 25 years of the Iowa Electronic Markets.” https://mickbransfield.com/2024/01/18/the-last-25-years-of-the-iowa-electronic-markets/

[6] Scientific American. (2008). “When Markets Beat the Polls.” https://mason.gmu.edu/~rhanson/PAM/PRESS/ScientificAmerican-3-08.pdf

[7] Academia.edu. (2017-06-20). “Prediction market accuracy in the long run.” https://www.academia.edu/33576301/Prediction_market_accuracy_in_the_long_run

[8] Marvn.ai. (2026-04-15). “The History of Prediction Markets: From University Labs to a Billion-Euro Industry.” https://marvn.ai/discover/guides/the-history-of-prediction-markets

[9] ChainCatcher. (2024-08-15). “Supporting Polymarket, Challenging CFTC: Crypto Giants Target the Hundred-Billion-Dollar Online Betting Market.” https://www.chaincatcher.com/article/2138558

[10] Jsquare Research. (2025-11-21). “Forecasting Markets and Emerging Languages.” https://www.chaincatcher.com/en/article/2222674

[11] CBS News. (2012-11-26). “Intrade boots U.S. residents hours after feds file charges.” https://www.cbsnews.com/news/intrade-boots-us-residents-hours-after-feds-file-charges/

[12] Politico. (2012-11-26). “Intrade to close U.S. accounts.” https://www.politico.com/story/2012/11/intrade-to-close-us-accounts-084248

[13] InGame. (2026-01-09). “US Prediction Markets: Modern Timeline.” https://www.ingame.com/us-prediction-market-timeline/

[14] Political Prediction Markets. (2018-11-02). “Is PredictIt Legal?” https://politicalpredictionmarkets.com/is-predictit-legal/

[15] Sacra. (2026-05-19). “Polymarket funding, news & analysis.” https://sacra.com/c/polymarket/

[16] Odaily. (2025-10-21). “From rags to riches: The life of the Polymarket founder.” https://www.odaily.news/en/post/5206978

[17] ChainCatcher. (2025-10-22). “The Billionaire Who Came Out of the Bathroom: The Story of the Polymarket Founder.” https://www.chaincatcher.com/article/2214285

[18] ChainCatcher. (2024-05-18). “The growth story of the crypto prediction market Polymarket.” https://www.chaincatcher.com/en/article/2124865

[19] Forbes. (2024-08-01). “Forbes Investigates Polymarket: 26-Year-Old Founder and a $1 Billion Prediction Market.” https://www.chaincatcher.com/en/article/2136444

[20] Odaily. (2024-11-11). “After the US election, how long will the Polymarket and prediction market craze last?” https://www.odaily.news/en/post/5199699

[21] CFTC. (2022-01-03). “In the Matter of Blockratize, Inc. d/b/a Polymarket.” Order document. https://www.cftc.gov/media/6891/enfblockratizeorder010322/download

[22] Odaily. (2024-08-01). “Polymarket founder: How a 26-year-old dropout disrupted the 500-year-old forecasting industry.” https://www.odaily.news/en/post/5197300

[23] The Block. (2025-01-03). “Polymarket’s huge year: $9 billion in volume and 314,000 active traders redefine prediction markets.” https://www.theblock.co/post/333050/polymarkets-huge-year-9-billion-in-volume-and-314000-active-traders-redefine-prediction-markets

[24] ChainCatcher. (2025-01-04). “Data: Polymarket’s cumulative trading volume in 2024 exceeds 9 billion dollars.” https://www.chaincatcher.com/en/article/2160639

[25] Fortune. (2025-10-07). “New York Stock Exchange parent company invests $2 billion in Polymarket at $9 billion valuation.” https://fortune.com/crypto/2025/10/07/polymarket-2-billion-intercontinental-exchange-new-york-stock-exchange-9-billion/

[26] Polymarkets.co.il. (2026-05-10). “From Fort Bragg to Tel Aviv: The Polymarket Insider-Trading Arrests That Are Now Reshaping Prediction Markets.” https://polymarkets.co.il/en/news/polymarket-insider-trading-arrests-worldwide/

[27] Fortune. (2025-07-22). “Polymarket says it is returning to the U.S. ‘in the near future.’” https://fortune.com/2025/07/22/polymarket-returning-to-us-qcx-qc-clearing/

[28] Investopedia. (2025-07-23). “Polymarket’s Derivatives Exchange Acquisition Sets Stage for a Return to US.” https://www.investopedia.com/polymarket-s-derivatives-exchange-acquisition-sets-stage-for-a-return-to-us-11777497

[29] CFTC. (2024-05). “CFTC Proposes Rule to Ban Event Contracts on Elections, Sports, and Awards.”

[30] CFTC. (2024). Statement by Chair Rostin Behnam on event contracts proposal.

[31] The Block. (2026-02-04). “CFTC formally rescinds 2024 event contracts proposal.” https://www.theblock.co/post/389714

[32] Yahoo Finance. (2026-02-12). “SEC Chair Suggests Some Prediction Markets Could Fall Under Agency’s Jurisdiction.” https://finance.yahoo.com/news/sec-chair-suggests-prediction-markets-212954244.html

[33] The Block. (2026-02-12). “SEC Chair Atkins calls prediction markets a ‘huge issue’ amid growing legal spotlight.” https://www.theblock.co/post/389714/sec-chair-atkins-calls-prediction-markets-a-huge-issue-amid-growing-legal-spotlight

[34] PYMNTS.com. (2026-02-15). “SEC Chair Says Agency May Get Involved in Regulating Prediction Markets.” https://www.pymnts.com/cpi-posts/sec-chair-says-agency-may-get-involved-in-regulating-prediction-markets/

[35] CFTC. (2026-02). Industry Advisory Committee appointments announcement.

[36] FinTech Weekly. (2026-04-02). “ICE/Polymarket: Intercontinental Exchange Has Put $2 Billion Into Polymarket. The Investment Is About Data, Not Prediction Markets.” https://www.fintechweekly.com/news/intercontinental-exchange-polymarket-financial-data-infrastructure-2026

[37] Yahoo Finance. (2026-03-27). “Line Between Partner and Owner Blurs As ICE Pours Another $600 Million Into Polymarket.” https://finance.yahoo.com/markets/crypto/articles/line-between-partner-owner-blurs-123320784.html

[38] Dune Docs. (2026-01-27). “Kalshi - Company History.” https://docs.dune.com/data-catalog/kalshi/overview

[39] Thairath. (2026-01-11). “Meet Luana Lopes Lara, the World’s Youngest Female Billionaire and Co-Founder of Kalshi.” https://en.thairath.co.th/money/business_marketing/corporates_leadership/2906839

[40] Odaily. (2025-11-21). “Prediction Market Overview.” https://www.odaily.news/en/post/5207704

[41] BlockEden. (2026-03-18). “Arizona Just Criminally Charged Kalshi: The Case That Could Decide Whether Prediction Markets Live or Die in America.” https://blockeden.xyz/blog/2026/03/18/arizona-ag-criminal-charges-kalshi-prediction-market-election-wagering-precedent/

[42] CSG South. (2026-04-15). “Prediction Markets.” https://csgsouth.org/policies/prediction-markets/

[43] CSGSouth.org. (2026). Historical timeline of prediction market regulation.

[44] NPR. (2012-11-26). “All Bets Are Off: Intrade Shuts Door To U.S. Customers.” https://www.npr.org/sections/thetwo-way/2012/11/26/165954281/all-bets-are-off-intrade-shuts-door-to-u-s-customers

[45] Odaily. (2026-02-15). “Polymarket vs. Kalshi: The Complete Timeline of the Prediction Market ‘Meme War’.” https://www.odaily.news/en/post/5209388

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。