Polymarket's regulatory limbo: why there is no legal solution in Ukraine

The ban on Polymarket in Ukraine has highlighted an uncomfortable reality: the country lacks a regulatory framework that allows the operation of decentralized prediction platforms. According to Dmitry Nikolaievskyi, an official at the Project Office for the Development of the Digital Economy of Ukraine at the Ministry of Digital Transformation, the situation goes deeper than a simple regulatory decision. Web3 prediction markets are in an unprecedented legal vacuum, with no possibility of legalization anytime soon.

An unprecedented legal vacuum

Ukrainian law does not formally recognize the concept of “prediction markets,” which automatically turns platforms like Polymarket into unauthorized gambling operators. “There is currently no legal way for Web3 prediction markets to operate in Ukraine under current regulations,” Nikolaievskyi told CoinDesk.

The problem lies not in a direct prohibition, but in the absence of legal categorization. Polymarket and similar services may have operated in an international grey area, but in Ukraine they face a fundamental regulatory barrier. The National Commission for State Regulation of Electronic Telecommunications (NKEK) issued a directive ordering internet providers to block access, following a recommendation from PlayCity, the country’s state gambling regulator.

In order for these platforms to operate legally, it would be necessary to pass a law on “Virtual Assets” that is currently stalled in parliament. Not only would this legislation allow businesses to use cryptocurrencies, but it would also establish clear definitions on what constitutes a prediction market. Nikolaevskyi acknowledges that without this legislative change, the stalemate will continue indefinitely.

War Accelerated the Inevitable

Although the ban was enforced under existing legal procedures, there was one factor that accelerated regulatory action: the presence of markets linked to the Russian-Ukrainian conflict. PlayCity identified “war-related” bets on Polymarket, including predictions about territorial captures, as an additional problematic element.

According to local reports, more than $270 million in war-related bets were placed on the platform. Nikolaievskyi admitted that “it cannot be ruled out that the presence of war-related betting may have accelerated the decision to block the platform, thus attracting the regulator’s attention more quickly.” The confluence of a legal vacuum and sensitive content resulted in a more immediate action than would have occurred under normal circumstances.

This situation places other prediction platforms such as Kalshi and PredictIt in a similar gray area. Although they were not included in the initial block, PlayCity allows any citizen to file formal complaints about suspicious platforms, meaning that any report could trigger similar enforcement actions.

The cracks through which it could seep

Although the ban is rigorous at the platform level, users are not at immediate risk. Nikolaievskyi clarified that “there is currently no legal effort underway to prosecute citizens who use virtual private networks (VPNs) or interact directly with smart contracts.” Nor has the state announced any intentions to hold users who evade the blocks accountable.

This distinction is crucial: the ban is aimed at centralized infrastructures, not individuals. Users can access it through privacy tools without fear of legal consequences, even if this remains in an area of regulatory ambiguity. Nikolaievskyi noted that he has not observed examples of users being sanctioned for this activity, reflecting a common reality in jurisdictions with emerging regulations.

Changes in sight? The legislative horizon

The prospects for legal change in the short term are grim. Any revision of the definition of gambling in Ukraine would require parliamentary approval, but Nikolaievskyi commented that “the likelihood of its revision is extremely low,” especially during times of war. The country’s legislative priorities are focused on security and reconstruction issues, not on regulating prediction markets.

The Ukrainian situation reflects a broader challenge facing global regulators. Polymarket is already restricted in more than 30 countries, with Portugal being the most recent to join the list. This pattern suggests that without a proactive legislative response, decentralized prediction markets will continue to be blocked in multiple jurisdictions, leaving their operators without legal viability in key territories.