The FBI yesterday surprised Polymarket founder Shayne Coplan in bed, seizing his phone and other electronics in an early-morning raid at his New York City apartment.

Why it matters: Crypto-based Polymarket is one of the most active prediction betting markets, which climbed into the mainstream conversation during the recent presidential election.

The big picture: The court-authorized raid quickly became a social media Rorschach test.

• Crypto and MAGA enthusiasts called it an outrage, obviously driven by political animus. Not only for President Biden's general hostility toward crypto, but also for the pre-election headlines Polymarket users garnered for predicting Trump's victory.
• Polymarket critics said it was about time authorities caught up to a site on which Americans aren't legally allowed to trade, per an earlier settlement with the CFTC, but appear to do so anyway.

The raid was part of a criminal investigation into whether Coplan and the company — which isn't registered in the United States to run a commodities exchange — were allowing U.S. users to place bets, the New York Times reported, citing a person with knowledge of the matter.

• Other prediction markets— including those offered by Kalshi and Robinhood — took legal bets in the U.S. during this election after a court ruling now under appeal.

What they're saying: "It's discouraging that the current administration would seek a last-ditch effort to go after companies they deem to be associated with political opponents," Coplan wrote last night on X.

• "Polymarket has provided value to 10's of millions of people this election cycle, while causing harm to nobody. We're deeply proud of that."
• A Polymarket spokesperson described the raid to Axios as "obvious political retribution."

Zoom out: Polymarket, the biggest of the prediction markets, is the only one that uses decentralized technology, Brady notes.

• It charges no fees to its users — not unusual for a decentralized application — but, like any business, at some point it has to make money for its investors. (It's already secured over $80 million from backers like Founders Fund, Polychain Capital, and General Catalyst.)

Zoom in: Crypto projects typically do this by creating a token, part of which goes automatically to founders and investors.

• Sources tell The Information that the startup is considering one, as it seeks a fresh $50 million in funding. In the meantime, Polymarket has warned users to be on guard about false announcements.

What we're watching: Coplan wasn't arrested, nor have any charges been filed against him or his company.

• If charges are brought, it would be up to the Trump administration to follow through. And its decision could provide big clues as to how the next Justice Department, possibly led by Matt Gaetz, plans to handle crypto matters (Polymarket operates on the Polygon blockchain).
• Already, a Trump confidant tells Axios' Mike Allen that the Gaetz pick was partially designed to "stop s--t like this."

Some of SEC chair Gary Gensler's biggest defenders are seeing the writing on the wall.

• "SEC Chair Gensler should resign," former SEC attorney John Reed Stark wrote yesterday on X.

Why it matters: Unlike all the (millions?) of similar comments from the crypto crowd on social media, Stark's comment carries significance: He's long been a vocal defender of Gensler and the SEC's approach to crypto.

Flashback: In June 2023 Stark wrote on X, "my take is that the SEC is spot-on with their crypto-related enforcement efforts."

• He added that "no matter what the carnival barkers promise," crypto trading platforms are unquestionably "high-risk, perilous and inherently unsafe."

The big picture: There's no evidence to suggest that Stark — who spent 11 years as chief of the SEC Office of Internet Enforcement — has changed his view on crypto.

• Instead, his call for Gensler's resignation is his acknowledgment of a new post-election reality.

Zoom in: "The people have spoken and should be respected," Stark wrote yesterday. "The SEC's crypto-enforcement wave (which has been extraordinarily successful in the Courts) should stop -- and the SEC should instead refer crypto-matters out to other law enforcement and regulatory agencies."

• He predicted that the SEC would soon "pause" crypto-enforcement and rule-making actions, part of a step back to study the technological aspects of digital assets in terms of how they may fit a new regulatory scheme.

"And that's fair, given the election results," he added. "SEC Chair Gary Gensler should respect the landslide victory of Big Crypto and the SEC staff should not partake in any sort of deep state subversion. The people have spoken, it's crypto-caveat emptor going forward . . . and let the chips fall where they may."

📈 U.S. bitcoin ETF inflows hit $4.7 billion over the last six trading days, as bitcoin became the seventh-largest asset in the world. (CoinDesk)

🇨🇦 Missing "crypto influencer" Kevin Mirshahi, abducted in June from a condo building in Old Montreal, was found dead. (Montreal Gazette)

🪙 Franklin Templeton is launching its Benji tokenization platform on Ethereum. (Blockworks)

The president-elect confirmed Tuesday that Elon Musk and Vivek Ramaswamy will lead DOGE, a new commission to cut government spending and streamline bureaucracy.

• Roughly three months after posting on X his desire "to serve" the government with a fake photo of himself speaking as a representative for a fictitious Department of Government Efficiency, Musk got his wish.

🐕 Zoom out: The department's acronym is an obvious homage to the Musk-friendly cryptocurrency, which he first tweeted about in 2019.

• He's since continued to use doge memes, even temporarily swapping in the doge dog logo as the logo on X last year.

💭 Pete's thought bubble: There is a growing list of meme coins amassing power in Washington.

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