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Polymarket

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Polymarket
Developer(s)Shayne Coplan
PlatformPolygon
Available inEnglish
TypePrediction market platform
Websitepolymarket.com

Polymarket is a decentralized prediction market platform that allows users to trade on the outcome of world events. Participants can deposit USDC cryptocurrency through the Polygon network and trade shares that represent the likelihood of specific outcomes occurring in the future.

History

Founded in 2020 by Shayne Coplan,[1] Polymarket is an online prediction market platform that would allow users to trade on the outcome of world events.[2] In January 2022, Polymarket was fined US$1.4 million by the Commodity Futures Trading Commission, and received a cease and desist order for regulatory violations, including failure to register as a Swap Execution Facility.[3][4] According to the CFTC, Polymarket offered "substantial cooperation" throughout the investigation, which resulted in the company receiving a lower fine.[1]

In May 2022, Polymarket appointed J. Christopher Giancarlo, a former Commissioner of the CFTC, as chairman of its advisory board.[5] In May 2024, the company announced that it had raised $70 million across two funding rounds.[6] These rounds included investments from Vitalik Buterin, the co-founder of Ethereum, and Founders Fund, a venture capital firm founded by Peter Thiel.[1]

In June 2023, Mother Jones reported that interest around the company had increased after a tweet about the outcome of the Titan submersible went viral;[7] the premise of the bet was whether the submersible would be found by a certain date,[7] rather than a wager on the fate of the passengers.[8] Polymarket had over 60 markets available at the time of the submersible wager, including the outcome of the Guatemalan presidential election and the likelihood of Twitter suing Meta, and the likelihood that Russia would use nuclear force.[8]

In 2024, the outcome of U.S. elections became the most active market on the platform,[6] with over $1.9 billion (as of October 15, 2024)[9] wagered on the presidential race between the Republican candidate Donald Trump and Democratic candidate Kamala Harris.[1] Nate Silver, founder of polling analysis firm FiveThirtyEight, became an advisor to Polymarket in 2024.[10] The site allows users to leave comments on markets. However, the content is largely unmoderated. In addition, several malicious sites can be found in the comment section designed to phish wallets.[citation needed] As of September 2024, Polymarket operates its election prediction operations offshore, as domestic operations would be regulated by the CFTC.[11]

On October 7, 2024, Polymarket showed a spike in the odds Donald Trump would win the 2024 election, to 53.3%, with a corresponding decline in Kamala Harris's odds, to 46.1%. Two Polymarket competitors continued to show Harris with better odds of winning, at about 51%; Polymarket also showed a slight edge for Harris throughout September. That day, the FiveThirtyEight simulation model found Harris had a 55% chance to win the election, while elections statistician Nate Silver said his model gave Harris 54.7% odds. Forbes reported on theories for the Polymarket divergence, including that one or more major wagers had been placed on Trump, possibly because Elon Musk had spoken at a Trump rally two days earlier, and had previously promoted Polymarket. On the day of the Trump spike, Musk reposted an X post that asserted "Kamala is collapsing before our eyes." However, due to Polymarket lacking a cap on individual investor amounts, large wagers by one or a few bettors may not reflect a material change in the election landscape. Silver, a Polymarket advisor, said the shift in Trump's favor was a "larger swing than is justified."[12]

Market resolution mechanism

Polymarket uses the Universal Market Access (UMA) protocol to settle its markets.[13] When users propose a new market, they must stake a bond, typically amounting to $750. Following a proposal, there is waiting period of approximately 2 hours during which the other users can dispute the proposed resolution. If no dispute is raised within this period, the user will get their bond back plus a reward, usually around $5 for their proposal.

In cases where there is a dispute, the proposal is escalated to UMA for a voting process. If the original proposal is affirmed as correct through the vote, the proposer is refunded their original bond, along with a portion of the disputer's bond, for example, $250 from a $750 bond. Conversely, if the proposal is voted to be incorrect, the disputer regains their bond and receives a share of the original proposer's bond.

See also

  • Stake.com, a similar gambling platform that accepts cryptocurrencies
  • Kalshi, an American financial exchange and prediction market

References

  1. ^ a b c d Folk, Zachary (May 14, 2024). "Peter Thiel Invests In Polymarket Political Betting Platform—But The Future Of Gambling On Elections Remains Unclear". Forbes. Archived from the original on September 6, 2024. Retrieved June 19, 2024.
  2. ^ "A resurgent online betting market is boosted by crypto and current events". NBC News. July 10, 2023. Archived from the original on September 6, 2024. Retrieved December 13, 2023.
  3. ^ "CFTC Fines Polymarket and Issues a Cease and Desist". Yahoo Finance. January 4, 2022. Archived from the original on December 13, 2023. Retrieved December 13, 2023.
  4. ^ "Event-Betting Platform Polymarket to Pay $1.4 Million U.S. Fine". Bloomberg.com. January 3, 2022. Archived from the original on January 15, 2022. Retrieved December 13, 2023.
  5. ^ Natarajan, Sridhar (May 19, 2022). "Crypto Betting Service Polymarket Taps Ex-CFTC Head as Chair After Agency Probe". Bloomberg. Archived from the original on September 6, 2024. Retrieved March 1, 2024.
  6. ^ a b Natarajan, Sridhar; Pan, David (May 14, 2024). "Peter Thiel's VC Firm Backs Election Betting With Polymarket Investment". Bloomberg. Archived from the original on September 6, 2024. Retrieved June 19, 2024. Polymarket has raised $70 million across two rounds, with the most recent raise led by Founders Fund...
  7. ^ a b Breland, Ali (June 23, 2023). "Meet the Internet Gamblers Who Won Big Betting on the Submarine's Fate". Mother Jones. Archived from the original on April 24, 2024. Retrieved February 29, 2024.
  8. ^ a b "A resurgent online betting market is boosted by crypto and current events". NBC News. July 10, 2023. Archived from the original on December 13, 2023. Retrieved December 13, 2023.
  9. ^ "Polymarket | Presidential Election Winner 2024". Polymarket. Retrieved September 25, 2024.
  10. ^ Salmon, Felix (July 22, 2024). "Prediction markets notch an important win with Biden's drop out". Axios. Archived from the original on September 6, 2024. Retrieved July 22, 2024.
  11. ^ Schwartz, Lee (September 9, 2024). "Polymarket likely to remain offshore for now despite ruling in favor of U.S. election betting". Fortune. via Yahoo! Finance Canada.
  12. ^ Small, Derek (October 7, 2024). "Trump's Election Odds Spike On Polymarket As Musk Touts Betting Site". Forbes.
  13. ^ https://docs.polymarket.com/#resolution
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