| Predictions-market platform Polymarket was undoubtedly one of the standout stars of crypto's Class of 2024, thanks to a blitz of activity around the US presidential election. Going into 2025, that spotlight's already starting to dim. Polymarket traders transact in cryptocurrency for wagers placed on the site, allowing users to buy "yes" or "no" shares on the outcomes of closely watched events. Among its newest and most popular markets on Tuesday included how many times Elon Musk will post on X this week, if New York City will repeal its controversial congestion pricing regime by summer or if Donald Trump will buy Greenland. Those markets aren't creating quite as much excitement as last year. Frenzied betting on the outcome of the Nov. 5 election led to the New York-based platform recording $2.3 billion and $2.6 billion in trading volume in October and November respectively, blockchain data compiled by Dune Analytics user rchen8 show. November's peak was a staggering 37,700% higher than the $6.8 million in volume it processed in the same month a year earlier, demonstrating just how quickly Polymarket hit centerstage. But demand soon began to ebb, slumping to $1.9 billion in December and tracking at around $515 million for January so far. Open interest on Polymarket — here meaning the value of all unresolved markets on a given day — fared even worse, falling 77% between Nov. 6 and Monday. Polymarket's self-professed goal is to be viewed as a new form of media, a source of truth that might reflect reality before mainstream outlets catch up. This played out spectacularly in the US election, when Polymarket's contracts called many of the individual races and the presidential outcome before traditional sources. The platform says it banned American users in 2022 as part of a settlement with US authorities. As its popularity skyrocketed, so too did regulatory scrutiny. The US Federal Bureau of Investigation executed a search warrant on Polymarket Chief Executive Officer Shayne Coplan in November, part of a criminal probe into whether the startup had circumvented that ban. This month, Singaporean authorities are said to have blocked access to the platform, according to local media reports, following in the footsteps of countries like France and Taiwan. An inquiry by the US Commodity Futures Trading Commission is ongoing, with crypto exchange Coinbase Global Inc. alerting users to a subpoena this month. Criticism of the ethics surrounding prediction markets is also rising. Among Polymarket's most popular bets on Tuesday were several linked to the spread of wildfire in California, drawing rebuke from those who argued its users were profiting from a national tragedy. A Polymarket spokesperson didn't respond to a request for comment.
Meanwhile, Kalshi, Polymarket's main rival, is starting the year with a competitive edge. Americans are allowed to use the platform thanks to a legal victory over the CFTC in September. And with Trump's return to the White House a week away, his son Donald Trump Jr. announced that Kalshi had signed him on to advise on its future strategy and expansion. To be sure, Polymarket is not the only one under the microscope. Federal regulators are reviewing trading in Crypto.com futures contracts that let investors bet on major sporting events including the Super Bowl. Kalshi has also faced criticism for offering contracts tied to the murder of UnitedHealth Group Inc. executive Brian Thompson last month. All in all, after a roaring 2024, Polymarket's starting the new year at the bottom of an uphill battle. | 
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