Polymarket is reportedly under investigation by the Department of Justice for allowing U.S. residents to trade on its platform, despite a regulatory settlement prohibiting such activity.

Even though the prediction market attempts to block U.S. IP addresses, legal experts suggest this measure alone may not suffice to comply with U.S. regulations, especially given Polymarket's previous regulatory issues.

To effectively prevent access by users from restricted countries, companies typically must enforce identification requirements, which raises concerns about user trust regarding personal data security.

This situation underscores long-standing compliance challenges within the crypto sector. The effectiveness of such measures as IP blocking and KYC requirements remains debated, especially for firms that have faced regulatory scrutiny like Polymarket.

Federal authorities recently conducted a search of Shayne Coplan's New York residence as part of the investigation, although no formal charges against him or the company have been made public.

Founded in 2020, Polymarket has become a notable name in crypto, processing billions in trading volume while using USDC, a stablecoin equivalent to the dollar, to settle bets on various real-world events.

The site's most popular betting category revolves around the U.S. presidential election. Recent attempts to manipulate these markets have triggered scrutiny and concern over market integrity, particularly regarding predictions about Trump's electoral performance.

As crypto companies look toward more accommodating regulatory environments, they will need to confront complex questions about compliance and trading access, particularly concerning American users utilizing VPNs.

Overall, Polymarket's struggles illustrate the intricate balance between innovative business practices and regulatory compliance obligations in the rapidly evolving digital asset landscape.