The grim specter of debanking returned to haunt crypto firms last week.

The Financial Times, Bloomberg, and Reuters have all reported that JPMorgan Chase stopped providing Polymarket with banking services in October last year.

The firms apparently managed to keep a lid on the development for several months. But someone seems to have let the cat out of the bag last week when discussing JPMorgan’s potential underwriting of a Polymarket initial public offering.

All the media outlets quoted unnamed sources “familiar with the matter” saying that “regulatory concerns” forced JPMorgan’s hand.

Polymarket told the media outlets it still has “a close, active relationship with JPMorgan across multiple entities.”

A spokesperson for the firm said “any suggestion” of a rift between the parties “fundamentally mischaracterizes our relationship.”

JPMorgan has so far maintained a stony silence on the reports.

Polymarket, unlike many of its rivals, is a fully fledged crypto firm. The firm uses the dollar-pegged stablecoin USDC for all its payouts and deposits via the Polygon blockchain network.

Crypto Firms’ Dark Debanking Past

While cutting off access to banking services is a new development for prediction market operators, crypto firms have a long history with debanking.

Several banks reportedly debanked scores of crypto firms during the Barack Obama and Joe Biden administrations.

Most justified the move by saying that these clients were high-risk and that they were concerned about regulatory pressure.

The Trump administration, however, claims that there was coercive pressure from the government.

In December, a House Financial Services Committee report found evidence that US government agencies used “aggressive enforcement actions” to cajole US banks into debanking at least 30 crypto firms.

“Regulators used this discretion to exert substantial pressure on financial institutions […] to discourage these entities from engaging in digital asset-related activities,” the committee wrote. “Regulators weaponized enforcement actions to achieve an anti-digital asset agenda.”

Trump’s Intervention

US President Donald Trump has moved to placate crypto firms. Last year, he issued an executive order that bans banks from “politicized or unlawful debanking.”

The order stipulates that federal banking regulators must probe financial institutions “that have engaged in or are currently engaging in debanking.”

Lawyers, however, claim that the order’s legal authority is “dubious.”

Given that JPMorgan seemingly pulled the plug on Polymarket in the weeks following Trump’s executive order, some fear that debanking remains a risk for those operating in the crypto space, the President’s promises notwithstanding.

“Our first-hand experience is unequivocal: Debanking continues at a large scale,” Alex Konanykhin, the CEO of the crypto firm Unicoin, told Techopedia.

Konanykhin said Unicoin has been debanked four times this year alone.

“Anything moving through crypto rails has faced banking troubles since the inception of the industry,” Diogo Cassinelli, Sales and Partnerships Manager at the São Paulo-based crypto firm Trace Finance, told Techopedia. “Prediction markets are no exception.”

Nonetheless, many crypto professionals say the situation has improved somewhat, even if debanking hasn’t gone away entirely.

“Compared to what we saw two or three years ago, legitimate crypto companies are in a much stronger position today,” Vladimir Tikhomirov, the co-founder of the decentralized finance firm Algebra, told Techopedia. “Banks are no longer refusing services based simply on whether a company is involved in crypto. The industry on the whole no longer needs to worry about blanket bans in the way it used to.”

Executive orders can only go so far in an industry where the buck ultimately stops with the banks and their risk managers, experts say.

“Trump’s executive order certainly increased pressure on financial institutions, but banks’ internal risk models remain stringent,” said Cassinelli. “Crypto companies operating on workarounds and informal banking relationships are always one misstep away from losing banking access, regardless of which administration is in power.”

Tikhomirov agreed that while systematic pressure from regulators may have vanished, financial providers still consider debanking a legitimate option.

“The responsibility to manage legal and reputational risks ultimately comes down to individual banks,” he explained.

Banks ‘Not Unreasonable’ to Dump Prediction Markets, Says Expert

The alleged Polymarket debanking may be an isolated case, some say.

“The [operator], in contrast with its direct rival Kalshi, was always lagging in terms of regulation,” said Tikhomirov. “A bank such as JPMorgan will be highly selective about which counterparties it is ready to work with directly.”

With prediction markets still fighting domestic and international legal battles, operators are never completely safe from debanking.

“As long as firms operate in regulatory grey areas, caution from banking partners is both inevitable and actually more than reasonable,” Tikhomirov concluded.

Also in Crypto News

Bitcoin Bear Market Nearing Its Bottom, Says VanEck

The indicators show crypto winter is about to enter its coldest months, say experts, with an end to months of downward and sideways price movement reportedly in sight.

“Bitcoin is approaching its cyclical bottom,” said Patrick Schramm, the managing director of the US-based asset management provider VanEck.

Schramm said BTC slipped into a bear market between October and December 2024.

VanEck uses a three-point analysis framework to make BTC price forecasts. And Schramm stated that two of the three indicators (global liquidity and onchain activity) are now neutral. The third, ecosystem leverage, has become positive.

Schramm said these signals indicate the bear market’s bottom is near, meaning some bigger investors will look to “gradually increase” their buying.

Analysts have long clung to the “Bitcoin four-year cycle” model, whereby Bitcoin Halving events see mining rewards slashed by 50% every 210,000 blocks.

This usually leads to a reduction in supply that sparks an 18-month bull market. After this, price corrections have invariably followed.

There’s just one problem with the four-year cycle model. A growing chorus of experts no longer buys into it.

“The predictable post-halving bear cycle is showing signs of exhaustion,” warned Schramm.

Some experts say the full-scale entry of institutional investors through Bitcoin spot exchange-traded funds has torn up the rule book.

They say the shift from an ecosystem dominated by retail investors to an institutional investor-heavy landscape has destroyed the model.

Not so fast, say others.

“The claim that Bitcoin’s historical structure has finally been repealed is itself a recurring feature of Bitcoin’s historical structure,” Ed Juline, President of Bitcoin Treasuries Media, wrote on X last month. “It has been made in every cycle, by skeptics and believers alike. It has been wrong in every cycle. The prior that it will be wrong in this cycle is not certainty, but it is not nothing.”

Harvard University Halts Bitcoin ETF Sales

Harvard University’s investment arm has stopped dumping shares in BlackRock’s iShares Bitcoin Trust following two consecutive quarters of IBIT sales.

In November last year, the university was holding onto almost $443 million worth of shares in the Bitcoin-focused exchange-traded fund.

The university makes investments via Harvard Management Company. This firm, launched in 1974, manages Harvard University’s endowment and financial assets by making stock market investments.

But the Ivy League university’s financial managers got cold feet amid a record-breaking Bitcoin ETF sell-off earlier this year.

Quarterly filings to the US financial regulator show Harvard reduced the size of its IBIT holdings to $101.4 million in the first quarter, but made no further sales in Q2.

Others think they have spotted a bargain. Filings show Tudor Investment, a fund run by the investor Paul Tudor Jones, has upped its IBIT share holdings by 19% in the past quarter.

Chainalysis Sues US Government Over TRM Labs Contract

Blockchain analytics – the art of using onchain data to unmask anonymous criminal activity – is now a big business, with governments all over the world spending millions on tools to help them dismantle crypto-powered crime rings.

But government agencies aren’t playing by the rules, says Chainalysis, after rival blockchain analytics provider TRM Labs landed a $95 million forensic software and support services contract with the US Immigration and Customs Enforcement (ICE).

Chainalysis has lodged its case with the Court of Federal Claims. It called ICE’s move “arbitrary, capricious, and unreasonable.”

ICE runs the Homeland Security Task Force in conjunction with the FBI. Earlier this month, the government handed the task force sweeping new powers.

The force can now deploy cyber tools against foreign criminal groups that target US-based individuals, companies, and infrastructure.

The TRM Labs deal will see the provider support the task force’s investigations.

The court will hear oral arguments from the parties during a September 2 hearing, with a decision expected on September 10.

Image Credit: Håkan Dahlström Photography (license)