TL; DR

• Polymarket saw a surge in growth during the 2024 U.S. presidential election, breaking into the mainstream.
• It is far ahead of competitors, with a continuously growing user base and trading volume.
• The platform benefits from decentralization but faces challenges related to market manipulation and complex user experience.
• Polymarket has established itself in the traditional public opinion industry, with potential for further evolution.
• Regulatory and legal uncertainties remain unresolved, posing compliance risks for the industry.

Understanding Polymarket

The Leading Decentralized Prediction Platform on Ethereum

Polymarket broke into the mainstream during the 2024 U.S. presidential election, attracting widespread attention from major media outlets and the general public. It successfully predicted Trump’s victory ahead of traditional polling agencies and mainstream media, reinforcing the idea that Polymarket is not just a betting platform but also a more accurate and reliable news source.

Polymarket is a decentralized prediction platform that allows users to place bets on various event outcomes using the Polygon blockchain. Polymarket hosts over 300 markets spanning multiple categories, including politics, cryptocurrency, pop culture, sports, business, and science. Prediction markets function as platforms where individuals can wager on the outcomes of future events, leveraging collective intelligence to provide probabilistic forecasts.

By eliminating traditional financial intermediaries and KYC (Know Your Customer) processes, Polymarket enhances user privacy and accessibility, aligning with the core principles of DeFi (Decentralized Finance) and Web3. Users can place bets by connecting their non-custodial Web3 wallets, without undergoing identity verification. Bets are placed using USDC, and thanks to a partnership with MoonPay, users can also fund their bets via bank transfers and credit cards.

The platform runs on the Polygon blockchain, a Layer 2 scaling solution for Ethereum that offers ultra-low transaction fees, making transactions nearly free. By processing a high volume of transactions on Polygon rather than Ethereum’s mainnet, Polymarket benefits from enhanced efficiency and scalability.

In the future, Polymarket plans to implement a DAO (Decentralized Autonomous Organization), allowing community members to participate in governance and further decentralizing the platform. Currently, Polymarket does not charge fees, and while the platform has not disclosed its monetization strategy, it has hinted at introducing fees in the future. For now, its primary focus remains on expanding its market and optimizing the user experience, with revenue generation to be considered later.

Source: Polymarket

Polymarket’s Early Backing from Leading Silicon Valley Tech Investors

Polymarket was founded in 2020 by Shayne Coplan, who was only 26 at the time but already had 12 years of experience in the crypto space. His journey began at the age of 14 when he was first exposed to cryptocurrency in a music-sharing community, where he and his friends mined Litecoin using mining rigs. At 16, he participated in Ethereum’s presale at a price of $0.30 per ETH, making him one of the youngest investors that year. At 18, he spent his high school summer internship at Chronicled.com, a company leveraging blockchain technology to empower the life sciences industry, where he worked alongside the Chief Product Officer (CPO) to design products that interacted with Ethereum. He later enrolled in New York University as a computer science major but dropped out after his second semester. At 22, he founded Union.Market, a multi-chain staking marketplace. He also published a long-form article on Block titled “Staking Beyond Consensus: Decentralized Digital Labor Markets,” sharing his research on market mechanisms.

The idea for Polymarket initially stemmed from Coplan’s interest in predicting the timeline for New York City’s reopening during the COVID-19 pandemic. Amid widespread uncertainty about recovery and reopening schedules, he recognized the need for a platform that could aggregate public predictions and insights to generate more accurate forecasts of future events. Today, Polymarket has grown into the largest prediction market, with its forecasting accuracy surpassing that of traditional polling institutions in the 2024 U.S. presidential election. Coplan envisions Polymarket as a “future trend indicator” and explains: “When you have a market, it distills all the noise and signals into a single, unbiased signal. This signal can remain consistently accurate and serve as an indicator of future trends.”

Source: LinkedIn

In October 2020, Polymarket secured $4 million in seed funding, led by Polychain. Notable angel investors included Balaji S. Srinivasan (former a16z partner and Coinbase CTO), Jack Herrick (founder of wikiHow), and Robert Leshner (founder of Compound). The company later raised $25 million in a Series A round led by General Catalyst, with participation from Joe Gebbia (Airbnb co-founder) and Polychain. Silicon Valley heavyweight and co-founder of PayPal and Palantir, Peter Thiel, led Polymarket’s $45 million Series B round through Founders Fund, with participation from Ethereum co-founder Vitalik Buterin.

In a press release, Joey Krug, a partner at Founders Fund, stated: “Polymarket has finally turned the vision of prediction markets into reality—an opportunity we’ve been excited about for years. Within Founders Fund, checking Polymarket when breaking news happens has become a habit. The practical benefits of using Polymarket to supplement social media and mainstream news consumption are obvious. We recognize that Polymarket is the winner in this market.” According to The Information, Polymarket is reportedly considering launching a token. If the company moves forward with its issuance plans, investors in the proposed funding round would receive warrants granting them the right to purchase tokens. The report suggests that Polymarket intends to use the potential token as a mechanism for users to verify real-world event outcomes.

Ethereum co-founder Vitalik Buterin has publicly endorsed Polymarket and the broader prediction market concept in his article “From Prediction Markets to Info Finance.” He stated: “Prediction markets are merely the pioneers of a more widely applicable field with the potential to expand into social media, science, journalism, governance, and other areas. I categorize this as ‘Info Finance.’” Buterin argues that traditional and social media often serve the interests of specific stakeholders, leading to exaggerated and sensationalized reporting. Instead, he integrates Polymarket’s data into his information-gathering workflow, as prediction markets offer probability-based insights on trending news and sudden events. These signals can prompt a deeper investigation into the causes of such changes.

Furthermore, Buterin emphasizes that predicting election outcomes is just one use case of Info Finance. The core principle is to leverage financial incentives to filter valuable information. By analyzing market prices, users can infer insights about world events more accurately than relying on traditional media alone.

Source: wellfound

Decentralized Prediction Markets Gain Mainstream Recognition

Bloomberg Terminal has begun incorporating Polymarket’s odds into its terminal services as an additional data source for analysis. The inclusion of Polymarket data in Bloomberg Terminal reflects the growing acceptance of crypto-based prediction markets as legitimate sources of information within the financial industry. It also highlights the potential of blockchain technology to enhance transparency and efficiency in political forecasting.

Expert commentary from media outlets such as The New York Times, The Economist, and The Wall Street Journal is typically highly professional and closely tied to their reputations. However, these opinions often represent limited perspectives and strictly adhere to editorial guidelines, giving them a distinct top-down nature.

Traditional polling institutions (such as YouGov, Ipsos, and the Pew Research Center) primarily focus on political beliefs and ideologies rather than expectations for future events. These surveys usually rely on limited random sampling and a combination of expert analysis, lacking the economic incentives that drive more informed predictions in markets like Polymarket. While traditional polling methods are carefully designed, they are not immune to biases, making them more inclined toward a top-down approach.

The rise of social media has enabled individuals to express their opinions freely, fostering a grassroots environment. However, centralized platforms are often influenced by highly subjective algorithms and selective moderation, making them less grassroots-driven than decentralized platforms like Polymarket. Furthermore, frequently amplified by large numbers of bots, fake news, and misinformation campaigns create a high-noise, low-signal environment, making it difficult to filter out well-informed opinions and verified facts. This phenomenon degrades the overall quality of discourse, making people more susceptible to superficial information.

Polymarket has achieved significant success in reaching product-market fit (PMF), particularly without relying on tokens or external incentives—something traditional public opinion platforms have been unable to accomplish. This success is reflected in several key areas:

1. Meeting User Demand: Polymarket satisfies users’ need for information and predictions. By allowing users to bet on various real-world events, the platform provides valuable insights into future outcomes. This model enables direct participation in the forecasting process without external incentive mechanisms.
2. Diversity of Public Opinion: Compared to traditional media and polling institutions, Polymarket aggregates perspectives from users of diverse backgrounds, resulting in a more representative and grassroots-driven forecast. This diversity enhances the platform’s ability to reflect genuine public sentiment.
3. Combining Expertise with Grassroots Participation: Users express their opinions through betting and collectively shape event outcome expectations through market mechanisms. This integration positions Polymarket as a crucial player in information dissemination and public opinion formation.
4. A Growing User Base: With increasing participants, Polymarket’s range of prediction markets continues to expand, demonstrating its acceptance and influence in the industry. This growth signifies users’ trust in the platform and the growing importance of decentralized prediction market data in modern society.

Source: mirror.xyz

Platform Overview

How Polymarket Works

Users can create markets for different outcomes, such as predicting whether a particular candidate will win an election. Once the market is open, other users can purchase shares in the outcome they predict, with prices fluctuating based on collective sentiment and trading activity, reflecting real-time probabilities. Betting users interact with decentralized applications (DApps) using the stablecoin USDC to place wagers on the outcomes they believe are likely to occur. Depending on the event’s outcome, they either receive a payout or lose their stake.

Polymarket utilizes Ethereum smart contracts to provide a secure, tamper-proof trading framework that executes agreements automatically without intermediaries, reducing transaction costs and enhancing user trust. Prediction markets adopt either an order book or an automated market maker (AMM) design. The order book functions similarly to traditional stock and futures markets, where buyers and sellers transact at listed prices. In contrast, AMMs automatically match buy and sell orders through smart contracts, eliminating the need for manual intervention. This dynamic environment allows users to monetize their insights and hedge uncertainty through diversified investments. Unlike centralized markets, where users trade against a bookmaker, decentralized prediction markets enable users to trade directly with others who have opposing bets.

Platform Advantages Summary

• Decentralization: All transactions and market resolutions are recorded on the Polygon blockchain and executed via smart contracts, ensuring transparency and immutability.
• User-Created Markets: Users are free to create markets on any topic as long as they comply with platform guidelines, such as predicting Federal Reserve interest rate hikes, Super Bowl champions, or key Federal Reserve economic data.
• Resolution Process: Market outcomes are determined by oracles and trusted external sources, such as authoritative media outlets like the Associated Press, ensuring fairness and accuracy.
• Security: By connecting to the platform via a self-custodial wallet, users retain full control over their wallets and private keys. The platform’s non-custodial nature means it does not hold users’ funds.
• Transaction Fees: Polymarket charges only a fee to cover transaction costs and a portion of incentive fees, which are directly distributed as rewards to liquidity providers. These fees help ensure sufficient market liquidity, reducing price slippage when buying or selling shares.
• Liquidity Providers: Users can choose to deposit funds into the platform’s liquidity pool to become liquidity providers, earning a share of transaction fee rewards.

Prediction Market Categories

Prediction markets can be classified into several types:

1. Binary Markets: Yes/No (e.g., Will Bitcoin reach $100,000 next month?)
2. Categorical Markets: Multiple options (e.g., Who will be the next U.S. president?)
3. Scalar Markets: Range-based options (e.g., What will Bitcoin’s price be next month?)

Polymarket supports two types of markets: CTF and NegRisk.

1. CTF Exchange is designed for single multi-outcome markets: It provides a simple scenario with multiple possible outcomes for a single question. For example, “Will Biden drop out of the presidential race?” supports two possible outcomes: Yes or No. “The highest-grossing movie of 2025?” supports multiple possible outcomes: Ne Zha 2, Creation of the Gods 2, Detective Chinatown.
2. NegRisk Exchange supports mutually exclusive binary markets: It breaks down complex scenarios into multiple Yes/No questions, each focusing on a specific outcome. For example, “Winner of the 2024 Presidential Election” can be broken down into individual questions, each addressing a specific candidate (e.g., “Will Biden win the 2024 U.S. presidential election?” or “Will Trump win the 2024 U.S. presidential election?”), with each question supporting two possible outcomes.

The average bet size in CTF markets has been steadily declining, whereas the average bet size in NegRisk markets has shown significant fluctuations. This reflects users’ preference for a diverse range of predictive questions while also demonstrating recognition of the prediction market platform’s mechanisms.

Source: Dune, 2025/2/26

Increasing Diversity in User Growth and Trading Behavior

Currently, the Polymarket platform has deployed over 3,000 prediction markets, and this number continues to grow. This trend suggests that users are gradually accepting prediction markets and are increasingly integrated into real-world news and events, reflecting a rising public interest in future outcomes.

As user engagement increases, Polymarket not only offers new opportunities for investors but also provides valuable data resources for research institutions and media outlets. This underscores the importance of prediction markets in modern society, particularly in an era where information spreads rapidly and decision-making often relies on public sentiment.

Source: Dune, 2025/2/26

There is a moderate positive correlation between the number of newly created markets and daily active users (DAU). This indicates that the demand for new markets or bets increases as the platform attracts more users. This trend suggests that a larger user base leads to more participants initiating markets to cater to a growing audience.

When DAU is below 4,000, there is a strong positive correlation between daily active users and trading volume. In this range, user behavior is more consistent, with participants exhibiting similar trading patterns and activity levels.

However, once DAU surpasses 4,000, trading volume variation increases significantly, reflecting a more diverse user base with varying levels of activity and engagement. As the platform grows, the differences in trading behavior widen, highlighting the evolving nature of Polymarket’s user community.

Source: Dune, 2025/2/26

Evolution of Prediction Markets

Development and History

The history of prediction markets dates back to the 16th century, with recorded bets on papal succession in 1503. In the U.S., Wall Street began tracking election wagers in 1884. By the 19th century, horse racing and sports betting became more prevalent, using odds to reflect the public’s collective expectations of event outcomes—an early form of prediction markets.

Modern prediction markets emerged in the late 20th century, notably with the establishment of the Iowa Electronic Markets (IEM) in 1988, which accurately forecasted multiple U.S. presidential elections.

The rise of the internet led to the creation of commercial platforms such as Intrade and PredictIt, but Intrade shut down in 2013 due to regulatory issues. The advent of blockchain technology further revolutionized prediction markets, with Polymarket exemplifying this trend by leveraging decentralization to provide an intermediary-free trading environment.

Industry Competitors

• Augur: Another Ethereum-based decentralized prediction market that uses its native token, REP, for rewards, market creation, and dispute resolution. Augur also features a dedicated sports betting platform. While both Augur and Polymarket support binary, categorical, and scalar markets, Augur’s reliance on REP tokens may impose higher costs on users. Recently, Augur launched the “Turbo” version on the Polygon network to improve trading efficiency.
• Gnosis: Gnosis offers a broader range of services beyond prediction markets, including decentralized trading, wallet services, and infrastructure tools. Founded in 2015, it has a more complex ecosystem where the GNO token plays a key role in governance and staking. Gnosis has also built its own Layer 2 solution, Gnosis Chain, to enhance scalability and efficiency while reducing costs. Unlike Gnosis, which aims to provide a comprehensive multi-functional platform for the Ethereum community, Polymarket focuses on simplicity and accessibility.
• PredictIt: Operated by the University of Iowa and regulated by the CFTC, PredictIt is a centralized platform with restrictions on trading and market creation due to U.S. regulations. While it is open to U.S. residents and easy to use, it has higher fees and fewer market choices than Polymarket.
• Kalshi: A CFTC-regulated platform in the U.S. that facilitates trading in U.S. dollars under strict KYC requirements. Kalshi offers markets for cryptocurrency price fluctuations and traditional financial events, appealing to users who prefer a regulated environment. It provides a wide selection of markets, including those related to finance and weather events.

Polymarket’s advantages lie in its decentralized community governance, low costs, user-friendly interface, fund security, and widespread influence, attracting more users to participate.

Market Position

Polymarket Dominates the Prediction Market Sector

The total TVL (Total Value Locked) in prediction markets currently stands at $169 million, with Polymarket leading the sector at $108 million, surpassing the combined total of the next top 10 competitors. From the data, it is evident that most of the industry’s TVL growth occurred in 2024. While there has been some decline, the strong retention rate suggests that TVL remains upward.

Source: DefiLlama, 2025/2/26

Explosive Growth

During the November 2024 U.S. presidential election, Polymarket’s trading volume reached $2.63 billion, with a total of over $9 billion for the entire year. The number of active traders peaked at 314,500 in December. Open interest hit $510 million but later dropped sharply by 76.5% to $120 million in December.

Despite the decline in participation, open interest remained on an upward trend, and trading volume increased by 66.5%. This indicates that a significant number of users are willing to explore prediction platforms built on a decentralized model.

Source: Dune, 2025/2/25

The U.S. election acted as a catalyst, driving Polymarket’s explosive growth and solidifying its position as a major prediction tool. However, trading volume dropped by 84% after the election, highlighting the platform’s reliance on major events. The majority of trading activity stemmed from bets related to the U.S. election. While overall volume may decline, a significant portion of liquidity could be reallocated to smaller markets. Many users initially drawn in by the U.S. election market may shift their focus to other prediction categories, such as Federal Reserve interest rate decisions, geopolitical conflicts, cryptocurrency price movements, and major sporting events. This retention rate suggests that Polymarket has the capability to engage users beyond a single large-scale event.

Notably, after a sharp decline, the average bet size has stabilized. The discrepancy between the surge in daily active users (DAU) and the slowdown in trading volume growth may indicate an influx of users with lower financial capacity or risk tolerance, leading to a decrease in the average bet amount.

Source: Dune, 2025/2/25

Legal and Regulatory Challenges

Compliance Issues

Polymarket’s compliance status has been a subject of controversy. In 2022, the platform settled with the Commodity Futures Trading Commission (CFTC) for operating as an unregistered derivatives trading platform, paying a $1.4 million fine and agreeing to block U.S. users from accessing the platform. CFTC Enforcement Director Vincent McGonagle stated: “Regardless of the technology used, all derivatives markets must operate within the bounds of the law, especially in the so-called decentralized finance (DeFi) sector.”

More than two years after the CFTC settlement, lawmakers and regulators have renewed their interest in cracking down on election betting. In May 2024, the CFTC proposed a new rule banning all derivatives trading related to U.S. elections. However, reports indicate that some U.S. users continue to access Polymarket using VPNs.

In November 2024, the FBI raided the home of Polymarket’s founder and CEO, Shayne Coplan, to investigate whether the platform allowed U.S. users to place bets—demonstrating ongoing regulatory pressure from the U.S. government. In the lead-up to the election, Polymarket publicly stated that it does not permit U.S. users to bet on U.S. elections, and has implemented identity verification for all large traders to prevent them from hiding their locations via VPN.

Additionally, the platform has been blocked in Singapore and France, where it is classified as an illegal gambling website, highlighting the complex global regulatory landscape.

Source: GRA Singapore

Risks and Limitations

Despite its many advantages, Polymarket faces several challenges:

• Market Manipulation: Large traders may influence market prices. For example, in 2024, a French trader profited $85 million by betting $30 million on Trump’s victory. While the platform’s investigation found no evidence of manipulation, this risk remains.
• Regulatory Uncertainty: The legal status of prediction platforms varies across jurisdictions, increasing operational risks.
• Data Accuracy: The platform relies on external sources to determine outcomes, which may lead to disputes if data is biased.
• User Experience: The complexity of decentralized platforms, such as managing wallets and understanding gas fees, may pose challenges for Web3 newcomers.
• Liquidity: Markets with low participation may suffer from insufficient depth, leading to wider bid-ask spreads and reduced prediction accuracy. Low liquidity can also make markets more susceptible to price manipulation by a small number of participants.

Conclusion

As an innovator in the prediction market space, Polymarket leverages blockchain technology to provide a decentralized and transparent trading environment. Its accurate predictions in 2024, particularly during the presidential election, demonstrate its immense potential. However, the platform faces legal and regulatory challenges that necessitate strategic measures to ensure long-term sustainability. As the prediction market industry continues to evolve, Polymarket’s adaptability and compliance efforts will be critical factors in determining its future.

Despite these challenges, Polymarket continues to thrive and innovate, as evidenced by its recent surge in activity. Unlike traditional prediction markets, Polymarket transcends geographical and thematic limitations, offering global public opinion insights across multiple sectors. Additionally, its blockchain-based infrastructure seamlessly integrates the dynamics of prediction markets with native financial systems.

Today, many users habitually visit Polymarket’s homepage—not just to check traditional news sources but to stay informed about global events and public sentiment. To solidify this trend, Polymarket must adopt a more deliberate strategy to establish itself as a reliable source of information, rather than merely a platform for opinion-based predictions.

Prediction markets like Polymarket have the potential to achieve greater success by striking a balance between information, entertainment, and financial incentives. What may currently be lacking is comprehensive information. By developing dedicated news and blog sections that explore various topics in depth, prediction markets can generate significant value for both users and society.

By integrating reliable sources of information, analysis, and debate, prediction markets like Polymarket can potentially drive the next revolution in information dissemination. Just as newspapers, television, and social media transformed how we receive information, prediction markets could synthesize these mediums, merging data, entertainment derived from betting and forums, and financial incentives. This shift could help reduce the perception that prediction markets are merely a form of gambling and may assist Polymarket in addressing regulatory concerns.

By incorporating these informational resources, Polymarket can better assist users in understanding and forecasting outcomes. This will reinforce its position as a reliable and valuable platform in the prediction market space, with the potential to reshape the landscape of information distribution.