JPMorgan Debanked Polymarket but Still Eyes IPO Underwriting Role

JPMorgan ended its banking relationship with Polymarket last year over regulatory concerns. However, the bank has remained close to the prediction market company as it considers an initial public offering.

The split highlights an unusual relationship between the largest U.S. bank and Polymarket. JPMorgan stopped providing banking services but continued cultivating other business ties.

The Financial Times reported that JPMorgan wants to remain considered for an underwriting role if Polymarket eventually goes public. Polymarket has not formally announced an IPO.

JPMorgan Debanked Polymarket

According to the Financial Times, the Jamie Dimon-led bank asked Polymarket to withdraw its funds last October. Since then, the company has been working to find a new banker.

In its letter, JPMorgan cited regulatory concerns when making its determination to terminate its banking relationship. That’s because, for a long time, the industry remained under legal scrutiny in the US.

The letter came at a time when the company was banned from the US under the Joe Biden administration. It returned to the country last year.

Despite these concerns, JPMorgan’s bankers have remained in close contact with Polymarket as the company considers going public. It recently invited its CEO to speak at a banking event for wealthy clients in Miami.

Media reports suggest that the company is about to raise funds at a $20 billion valuation as its annualized revenue jumped to $1 billion in June.

If Polymarket selects JPMorgan to underwrite its IPO, chances are that it will make millions of dollars.

Prediction Market’s Regulatory Concerns Have Remained

The prediction market has done well in the past few months, a trend that surged during the World Cup event. Polymarket and Kalshi handled billions of dollars in bets during the tournament.

In addition to this, the companies have become major beneficiaries of the booming perpetual futures market. DeFi Llama data shows that the company handled over $11.6 billion in transactions in the last quarter, slightly lower than the previous quarter’s $11.7 billion. This growth has led to a significant underperformance of publicly traded betting companies like DraftKings and Flutter Entertainment.

The regulatory environment has improved substantially in the US, with the CFTC taking a more lenient approach. This move has allowed Polymarket to move back to the country, where it is slowly gaining market share.

However, some challenges remain. For example, the state of New York has launched an investigation into Polymarket and Kalshi. Officials are assessing whether the companies targeted minors in their advertising campaigns.

Meanwhile, a judge in Seattle has asked Kalshi to stop operating in Washington state in a major blow to the industry. The ruling came after the state’s attorney general argued that the platform was operating illegally there, as the state prohibits online sports betting. The ruling means that Polymarket may also find it difficult to expand in the state.

Nevada has also challenged these companies to operate in the state. However, the companies have found a receptive CFTC, which has argued that it is the sole regulator in the industry.

The industry is facing some major challenges. For example, there have been concerns about insider trading. Just recently, the person who used to operate Donald Trump’s teleprompter was accused of placing bets on what he would say.