Intercontinental Exchange Inc., the operator of the New York Stock Exchange, will invest up to $2 billion in prediction market startup Polymarket.

The deal, which was announced today, also includes other elements. Intercontinental Exchange will make data from Polymarket’s platform available to financial institutions. Furthermore, the companies plan to partner on tokenization initiatives.

In addition to the NYSE, Intercontinental Exchange owns specialized exchanges focused on financial instruments such as futures. It also operates multiple clearing houses, platforms that automate the administrative work involved in processing stock exchange trades. The company generated $2.5 billion in revenue across its businesses last quarter, a 10% increase from the same time a year earlier. 

Polymarket, for its part, operates a platform that enables users to bet on events such as elections and sports championships. Customers place bets in USDC, a stablecoin issued by newly public Circle Internet Group Inc. An application programming interface enables developers to integrate Polymarket into their services. 

In 2022, the U.S. Commodity Futures Trading Commission, or CFTC, accused the company of operating an unregistered derivatives trading platform. Officials dropped the charges after Polymarket agreed to stop offering its platform in the U.S. France, Singapore and several other countries have also banned Polymarket over gambling law violations.

Earlier this year, word emerged that the CFTC had renewed its scrutiny of the company. The agency reportedly launched a probe to determine whether Polymarket breached its pledge not to offer its platform in the U.S. The U.S. Justice Department opened its own investigation into the matter. 

In July, Bloomberg reported that officials dropped both probes. Shortly thereafter, Polymarket launched a push to reenter the U.S. market. It kicked off the initiative by buying a CFTC-licensed exchange operator called QCEX for $112 million. Last month, Polymarket Chief Executive Officer Shayne Coplan announced that the company “has been given the green light to go live in the USA” by the CFTC.

The timing of Intercontinental Exchange’s investment may be related to the recent regulatory milestones. Polymarket’s return to U.S. market could give it access to significant new revenue opportunities. In addition, the CFTC’s approval may make it easier for the company to win over international regulators.

The all-cash investment values Polymarket at $9 billion. As part of the transaction, Intercontinental Exchange plans to make Polymarket’s “sentiment indicators on topics of market relevance” available to thousands of financial institutions. Those indicators presumably include the bets that gamblers place on the platform. Polymarket users can bet that a potential future event will happen or that it won’t.

Intercontinental Exchange also said that it plans to collaborate with the company on “tokenization initiatives.” Last month, rival Nasdaq Inc. asked for regulatory approval to list tokenized versions of stocks on its platform. Intercontinental Exchange’s partnership with Polymarket hints that it may seek to follow suit in the future. 

Photo: Shayne Coplan