Predict the future or manipulate it? The rise of Polymarket and the controversies behind it

Will Jesus return to the world in 2025? On the prediction platform Polymarket, for this question with a total bet of $900,000, there are still 1% of people betting on "Yes".

Meanwhile, topics such as whether the Federal Reserve will cut interest rates in September, whether the Russia-Ukraine war will cease fire in 2025, whether Taylor Swift will be pregnant in 2025, who will be the most powerful large AI model by the end of September, and how many tweets Musk will post in September are all real-money bets on the prediction platform Polymarket. The uncertainty of all things in the world can be priced, traded, and bet on.

The largest recent bet related to the 2024 US presidential election has attracted a staggering $3.68 billion in funds. A French "whale" made a fortune of $85 million by using a self - created strategy to heavily bet on Trump.

Polymarket not only impacts the traditional polling market but has even entered Wall Street: Bloomberg Terminal has accessed its data, and quantitative funds are also following its trends. On August 26, the venture capital firm under Donald Trump Jr. bet on Polymarket; Peter Thiel's Founders Fund has also invested. With the entry of giants, the bets are escalating.

What exactly is Polymarket, a platform driven by encryption technology? How does it transform the most complex events in human society into financial instruments like stock codes? Is it just a high - tech global casino operating in the gray area on the edge of regulation? Or does it represent the future of information finance and is a decentralized machine capable of penetrating noise and revealing the truth?

01

Unveiling Polymarket and the History of Prediction Markets

To understand the subversiveness of Polymarket, we must first abandon our concept of traditional casinos. Polymarket is fundamentally different from the traditional gambling industry. It is more like a "stock market" for all kinds of real - world events that operates 24/7.

When you open the Polymarket website, you will see various topics to bet on, or rather, bets. Each place where you can place a bet on a topic is a market.

For example, the Federal Reserve will make a decision in September. It lists four possibilities: a 25 - basis - point interest rate cut, the interest rate remaining unchanged, a more than 50 - basis - point interest rate cut, and a more than 25 - basis - point interest rate increase. You can bet on these four possibilities, Yes or No.

This is a prediction market. You can bet $10 or $1 million. Of course, if you place a large bet at once in a bet with a small total pool, it will affect the odds.

The operating logic of Polymarket is cleverly designed as a market similar to stock trading. Here, every imaginable future event is transformed into a tradable asset with its own unique "stock code" - whether it's "Will the Russia - Ukraine war cease fire in 2025?", "Will Taylor Swift be pregnant this year?", or "What will the price of Bitcoin reach in 2025?"

The "price" here does not represent any intrinsic value but is a real - time reflection of the market's probability of the event occurring. This price fluctuates between $0 and $1 and is denominated in the stablecoin USDC pegged to the US dollar. Its value itself is the probability.

For example, when the price of a contract stating "Trump will win the US presidential election" is $0.51, it means the market thinks he has a 51% chance of winning. Once the event is settled, the value of the correct contract will become $1, while that of the wrong one will become zero. And the funds users invest, that is, the number of "shares" they buy, represents their risk exposure and strength of belief in this game. Investing $100 to buy a contract priced at $0.51 essentially means using a $100 bet to support an event that the market thinks has a 51% probability of occurring.

This is the mystery of Polymarket's operation, which almost completely subverts the traditional gambling industry:

First, Polymarket has no house. The core of a traditional casino is the "house", which sets the odds, accepts bets from everyone, and makes a profit from it. There is a fundamental conflict of interest between the house and the vast majority of players to some extent. However, Polymarket uses the smart contract technology of the blockchain to completely eliminate the house. The platform itself does not participate in the bets and does not set the odds.

All transactions follow the "matched trading" model: Any "bullish" (Yes) bet must be matched by another "bearish" (No) bet with the same amount of funds and price, that is, probability, to be executed.

For example, if you want to bet $1000 at a 30% probability ($0.3) that the Russia - Ukraine war will cease fire in 2025, there must be exactly another person in the market willing to bet about $1000 at a 70% probability ($0.7) that the Russia - Ukraine war will not cease fire in 2025 for your transaction to be successfully matched.

This design fundamentally eliminates the "house edge". The platform becomes a pure intermediary, a platform where bullish and bearish views directly collide. Just from this point, it is fairer than any centralized casino.

Second, Polymarket is "trading the process" rather than just "locking in the result". In traditional gambling, once a bet is placed, the funds are locked, and it's a "one - shot deal" waiting for the final result. Polymarket is completely different. It allows users to freely buy and sell the contracts they hold at any time before the event is settled.

This means that you can lock in profits or cut losses according to the real - time changing probabilities. Suppose you bought Harris' contract when she was just nominated as a candidate and her probability of winning was only 10%, that is, the price was $0.1. When her poll numbers soared to 50% a few months later and the price rose to $0.5, you could immediately sell it and get a four - fold profit without caring whether Harris actually wins the election in the end.

This completely changes the nature of gambling. It turns betting on the "result" into a financial transaction that can be dynamically operated and predict the "process". It rewards not only the final correct judgment but also the accurate grasp of probability fluctuations during the process. This is very similar to the stock market. You not only need to care about the result, but the fluctuations themselves also reflect great value in predicting trends.

Third, Polymarket rewards liquidity. This is also similar to the secondary market. We know that one of the major advantages of the secondary market is good liquidity. It is different from the primary market or the real estate market. In these markets, whether it's the equity of startups in the primary market or real estate, it's difficult to trade quickly. However, the stock market has very strong liquidity.

To ensure the market's activity, Polymarket even "pays users back". The platform provides liquidity rewards to users who place buy and sell orders near the current market price.

On the one hand, this is in sharp contrast to the practice of traditional casinos taking a cut. On the other hand, this mechanism encourages users to provide depth to the market liquidity and ensures that more transactions can be carried out smoothly. It ties the interests of the platform and users together to jointly expand the overall market.

Liu Feng

Partner at BODL Ventures

Former editor - in - chief of Chain News:

The core value of the prediction market is that more and more people will regard it as a very effective information - finance market. Because people think that in the traditional information market, those with a loud voice or the communication channels of traditional media may have a large number of experts and politicians conveying information. And more and more people will regard the prediction market as a further information market. People use money to bet on real and reliable information. On the premise of the assumption of the efficient market theory, an efficient market can be "gambled" with money. So many people will regard the prediction market as a valuable information hub in the future.

Of course, this seemingly sophisticated "prediction machine" is not without flaws. Decentralization has also brought the most difficult problem - the adjudication dilemma.

When the result of an event is objectively clear, such as the outcome of a US presidential election or the score of a football game, the system can settle smoothly with almost no disputes. However, when the definition of the result itself is vague or there are disputes over the recognition of facts, problems arise.

Polymarket entrusts the adjudication of such thorny disputes to a decentralized "oracle" called "UMA". Holders of UMA tokens can vote by staking their tokens to determine what the "truth" of an event is based on the principle of "majority rule".

However, this seemingly good mechanism has still caused many disputes in practice. A typical example stems from the ambiguity of the judgment criteria.

Bill Sun

Co - founder of Gen Alpha

Ph.D. in Artificial Intelligence and Mathematics from Stanford University:

For example, there is a type of bet: which company's model will rank highest on a certain list, whether it's OpenAI, Anthropic, xAI, or Gemini. The benchmark for measuring the highest level is very different. When each company releases its model, it claims to be the best in a certain aspect. So the outcome of this bet ultimately depends on which benchmark is used for measurement. Everyone has their own opinion. The approval process of the Polymarket team has led to many not - very - strict bets being published. But the people who design these bets are not financial professionals, mathematicians, or logicians. So it's difficult for their bets to form a clear binary result based on objective facts.

Therefore, when the facts themselves have multiple interpretations or there are suspicions of vote - manipulation, it will cause great disputes.

Let's take two real - life disputes on Polymarket as examples: In a bet on "Whether Ukraine will agree to Trump's rare - earth agreement before April", if the two countries sign a "rare - earth - related agreement" before the deadline, the market will judge it as "Yes"; otherwise, it's "No".

The result was that before the deadline, the US and Ukraine did not have a formal and clear rare - earth mining or supply agreement, but they had some memorandums of understanding (MOU) or cooperation intention documents and publicly stated in diplomatic occasions that they would strengthen cooperation in the field of critical minerals.

Disputes then arose. Some people thought that memorandums of understanding or intention statements were not agreements and should not be counted as "reaching an agreement"; while others believed that these publicly signed documents and commitments had already constituted an agreement. Eventually, the UMA vote ruled it as "Yes", resulting in heavy losses for a large number of traders who bet on "No", and they accused it of "distorting the facts" because there was no real legal agreement.

This incident caused a great backlash in the cryptocurrency community. Some people thought it was a sign that the UMA voting mechanism was manipulated and that "big players influenced the result".

Another incident occurred in a bet on "Will Zelensky wear a suit before June". The original intention of this topic was to capture news events, which was quite interesting but prone to semantic ambiguity.

At that time, Zelensky was wearing an outfit similar to a "military - green coat + trousers". Many mainstream media and even the official Ukrainian Instagram account described it as a formal black suit. Many users who bet on "Yes" thought they were sure to win.