Polymarket wants to let users wager on arrests and pandemics. The platform self-certified the markets on Tuesday, the same day as Congress heard testimony that the market certification process is robust.
“A qualifying arrest occurs when {participant} is taken into physical custody within the territory of
{jurisdiction} by {authority}, voluntarily or involuntarily, and at least one of the following is true: (i) {participant} is
criminally booked or processed; (ii) {participant} is taken into custody in response to a criminal arrest warrant,
criminal charge, indictment, or equivalent criminal charging instrument; (iii) {participant} is held for arraignment, bail,
extradition, or other criminal court proceedings other than as a witness; or (iv) {participant} is transported to a police
station, detention facility, or equivalent in connection with a criminal arrest,” Polymarket wrote in the documents submitted to the CFTC.
The terms and conditions add that a person being charged, indicted, or interviewed without being taken into custody would not constitute a winning wager.
Polymarket already has several arrest markets on its international platform, including Benjamin Netanyahu, Barack Obama, and YouTuber Reckless Ben. It also has a wide sweeping market on who will be arrested in 2027, which has attracted over $200,000 in trades.
Arrest Markets: A Gray Area Under Current Regulations
The Commodity Exchange Act (CEA), which sets the rules for prediction markets, states that markets related to “unlawful activity” may be deemed contrary to the public interest and thus prohibited.
The CFTC is revising the rules, taking a broader definition of “gaming” to allow sports contracts, despite widespread opposition from state regulators. The revised rules continue to prohibit wagering on unlawful activities, but markets on arrests would likely be accepted.
The markets relating to an individual’s arrest center on a lawful action by law enforcement. If the market focused on the crime, then this would be forbidden.
“An event contract that settles on whether an individual will murder someone involves an activity that is unlawful under State law, because the settlement-determining occurrence—the murder—is itself within unlawful activity,” the CFTC stated in its proposed rules.
“By contrast, an event contract that settles on whether Bernard Madoff is convicted of securities fraud by a specified date does not involve activity that is unlawful within the meaning of the Special Rule. The settlement determining occurrence is the entry of a judgment of conviction by the court, which is a lawful judicial act,” the document adds.
CFTC Has Robust Certification Processes, Hears Congress
Yesterday, the House Committee on Agriculture hosted a session focused on consumer protections and market integrity in sports markets.
Critics, including Chris Cylke of the American Gaming Association (AGA), argued the self-certification process is “uncontested,” allowing for a wide range of contracts that are contrary to the public interest.
Former CFTC general counsel Carl Kennedy testified that the self-certification process for new markets is collaborative, and exchanges often seek unofficial approval before submitting documents.
“In practice, self-certification has long operated as a collaborative, iterative process rather than a unilateral act,” Kennedy told the committee. “Exchanges routinely pre-engage with Commission staff on novel products. An exchange will informally test a draft or proposal, receive staff’s preliminary and non-binding views, and then file the self-certification, so that the formal one-business-day submission is often the last step in a much longer dialogue.”
Polymarket Also Certifies Pandemic Markets
It is unclear whether Polymarket sought approval for its arrest markets before submitting the self-certification documents on Tuesday. In addition to the arrest markets, it also self-certified pandemic disease contracts.
Kalshi and Polymarket both previously had markets related to the spread of the Hantavirus. Polymarket’s contracts were traded on its international exchange, which is not subject to CFTC regulation.
The new submissions on Tuesday will allow it to list future pandemic contracts on its US platform. Critics will argue that these kinds of markets are ripe for insider trading and manipulation that could have damaging consequences.
Lawmakers have strongly opposed markets related to war and military actions as they have the potential to create bad incentives. Markets related to arrests and pandemics are likely to face similar accusations.
