In early November, Shayne Coplan had a week he’ll remember for the rest of his life: He got a call from the highest echelons at Mar-a-Lago. He entered television for the first time. And he had his New York apartment raided by the FBI.

The eventful few days underscore the precarious position of both the 26-year-old and his startup Polymarket, the online prediction market that became a household name in the final months of the presidential campaign and in the days and hours leading up to the elections. , predicted the outcome more accurately than most polls.

In an interview with wealth earlier this week, Coplan expressed his excitement about what he has accomplished and the future of his company. “I learned that anything is possible,” he said. “Turning dreams into reality has never been more tangible, and luckily I’m a dreamer. The world is shaped and changed by optimists.”

On Wednesday, however, Coplan’s tone changed. After the FBI confiscated his phone and laptop, took to X and defiant he posted on Twitter that the raid was baseless and driven by vengeful political forces upset by the election result.

The legal situation is still developing. The FBI declined to comment; Coplan and his lawyers have said the founder did nothing wrong, and neither side has said explicitly what Coplan might be investigated for — though it’s worth noting that Polymarket is under federal scrutiny. consent decree not to offer certain prediction contracts to US citizens.

Polymarket declined to comment for this story, noting only that Coplan has also appeared at recent Democratic events, including one with vice presidential candidate Tim Walz. (Coplan also tweeted that he is not partisan.)

But how the investigation plays out may determine whether Polymarket cements its place as a major new force in US politics — or whether Coplan and his company flew too close to the sun and opened the door for a competitor to take their place.

A political giant and a darling VC

On election night, Donald Trump’s campaign team became increasingly jubilant as Polymarket charts – which reflect the betting activity of tens of thousands of punters around the world – showed the spread between their candidate and Kamala Harris bigger and bigger. As the first results came in, that spread became a chasm. The next day, Trump’s golf buddy Zach Witkoff congratulated Coplan on X, saying everyone at Mar-a-Lago — including the president-elect — used Polymarket to weigh in on the election; one of the most senior figures in Trump’s orbit also called Coplan to congratulate him.

Polymarket burst onto the scene this year, but the idea behind it is centuries old and reflects a notion popularized in the book The wisdom of crowdsthe fact that crowdsourcing a question can produce very accurate results. In practice, Polymarket users can visit the site and bet on the outcome of various events. On November 14, for example, bettors could bet 70 cents on prediction that the price of Bitcoin will reach $100,000 this year; if correct, that 70 cent bet would win a dollar. In theory, the larger the crowd, the more accurate the prediction.

For weeks, Polymarket has acquired an oracle-like status in both Trump world and a growing cross-section of the political class. The site has already shown remarkable insight in predicting Trump’s selection of JD Vance as his VP nominee and that Joe Biden will drop out. Indeed, Polymarket’s stature has grown to such an extent that the country’s most famous pollster, Nate Silver, decided in July to join the company. In the last three months of the campaign, traditional polls have turned sharply, usually showing Trump or Harris either virtually tied or with margins of error. But Polymarket showed steady Trump with odds of winning 60% or better—led some pundits to value the site and its founder when the former president won.

Election prediction markets have been banned for decades in the US by the Commodities and Futures Trading Commission. The legality of the CFTC ban, however, has been questioned in recent years; a federal district court recently ruled that the ban does not apply Kalshia competitor Polymarket and other prediction sites have since been encouraged to promote their services more aggressively.

Coplan is very much the face of the emerging industry. He grew up in New York Citychild of academic parents, and has a distinctive head of bouncy curls that help give her the effect of a member of an alternative rock band. A self-proclaimed “nerd boy,” Coplan became deeply interested in probabilities in high school, which led him to start Polymarket at the age of 21. The site stands out in part because it relies on the blockchain to track bets, users using the stablecoin USDC. to pay or collect.

While Polymarket didn’t become a household name until this year, the company’s investors include crypto-luminaries such as Ethereum founder Vitalik Buterin and former Coinbase CTO Balaji Srinivasan. The startup is also backed by venture capital firms like DragonFly and Founder Peter Thiel’s Fund.

So far, Polymarket has raised $74 million and has a staff of about 30 employees. While VCs like to claim they don’t have favorites among their portfolio companies, the host of a VC dinner in Manhattan this summer quietly identified the “Polymarket type” for wealth as the most important participant.

Accurate but controversial predictions

As Polymarket became a fixture of election coverage, it was also scrutinized. Skeptics pointed out that US citizens were banned from using the platform, meaning the prediction data came from foreigners, not Americans. Others questioned whether his predictions could be skewed by the site’s popularity among cryptocurrency users, who are largely politically inclined.

There was also the issue of wash trading – a term that describes a person who takes both sides of a trade, often in the hope of artificially inflating liquidity or trying to beat the bottom line. Before the election, Polymarket’s competitors approached numerous reporters with data they claimed showed the site’s trading data was unreliable. wealth driven his own investigationcontacting two independent forensics firms, who analyzed blockchain data and found that approximately 30% of Polymarket’s transactions consisted of wash trading. In his conversation with wealth This week, Coplan slammed Fortune’s findings and other stories about unusual data patterns as ill-informed “hit pieces.”

In any case, the implications of wash trading on Polymarket are unclear. Despite fears by some that punters could manipulate betting markets to influence elections, there is no evidence that this has occurred. According to Matthew Beville, a securities attorney with WilmerHale, who co-published a recent article on prediction markets, the washed-up trading on Polymarket (which is not a client) may have a more mundane explanation: the trades could reflect users who want to intensify their activity. on the platform in hopes of receiving an “air drop” – a crypto term describing a project that issues a tradable token to loyal users. The company declined to comment on whether such tokens are part of its plans.

Coplan may rightly feel vindicated about Polymarket’s performance following the election results, but there are still questions about the site and its business model. For starters, trading activity on the site has dropped sharply since the presidential election, meaning it could prove difficult to grow a regular business outside of major political events. Meanwhile, the popular trading platform Robinhood has attracted millions of bets on it own newly released prediction platform – suggesting that Polymarket could face a lot more competition in future election cycles.

Then there is the issue of income. Unlike Kalshi and others, Polymarket does not charge commissions. Until now, the company has been coy about how it will pay for its continued operations. One option may be to charge companies or political candidates to run custom bets on the site to help them gauge future events. Another would be to issue your own crypto token – a prospect that suddenly seems more viable in light of recent intervention by Republicans in the White House and Congress, who have been far more crypto-friendly than Democrats.

The FBI probably waited until after the election

For now, though, there’s the question of the FBI investigation and what it might signal for the future for both Coplan and Polymarket.

“New phone. Who doesn’t?” Coplan wrote on X Wednesday afternoon, following up with a second post claiming the FBI raid on his apartment amounted to “a last-ditch effort” by the Biden administration to go after those connected to Trump. Coplan’s tweets came soon after New York Post the first one broke news of the raid in a sympathetic account.

The warrant on which the FBI search was allegedly based is not yet public and no indictment has been filed. As such, it is not possible to know the precise allegations against Coplan and Polymarket. A well-placed crypto lawyer he talked to wealth on the condition of anonymity to preserve his professional relationships, puts the incident into context.

According to the lawyer, industry lawyers had been expecting the feds to take action for months in response to what appear to have been lax compliance measures by Polymarket. The lawyer said any charges would likely be related to allowing Americans to trade on the platform, which would have violated a 2021 consent decree with the CFTC. This decree treats Polymarket as a regulated entity, subject to laws that require contract marketplaces to collect data about their customers and report suspicious activity. In recent months, the company appears to have breached its obligations by displaying the logo at events in the US and engagement American social media influencers to promote the site.

The crypto lawyer compared Coplan’s social media behavior to that of FTX founder Sam Bankman-Fried before the SBF indictment – ​​defiant, but also stupid. Indeed, the attorney believes that the FBI likely chose to wait until after the election to conduct the seizures in order to avoid looking political.

The defiant response so far from Coplan and Polymarket may reflect – appropriately enough – a bet that regulators will back down in reaction to Polymarket’s popularity with the incoming administration.

Coplan’s tweet characterizing the FBI raid as a vindictive move by the Biden administration has already received support from powerful figures in the Trump world, including Elon Musk, who responded, “Indeed.” Coplan responded to Musk by simply posting an icon of an eagle.

This story was originally presented on Fortune.com