Prediction market operator Polymarket has come under growing scrutiny for its listed contracts, which allow users to trade on the outcomes of active military conflicts, including its most recent scandal involving its refusal to honor the result of the capture of then-Venezuelan President Nicolás Maduro. Other active contracts range from Russia’s involvement in Ukraine to the odds of China’s potential takeover of Taiwan.
Key Takeaways
- Federal lawmakers and gaming trade groups are challenging the legality of contracts tied to military operations and national security.
- Some controversial options include wagers on the capture of Ukrainian cities and the potential for a Chinese invasion of Taiwan.
- Polymarket is transitioning from a crypto-only international model toward a regulated U.S. presence following the acquisition of a domestic exchange.
According to Bloomberg, Polymarket, which has recently acquired a $2 billion investment from the parent company of the New York Stock Exchange, has since expanded its offerings to include various wagers on military conflicts across the globe.
One specific market regarding U.S. strikes in the Middle East has already facilitated more than $18 million in transactions. The prediction markets operator has since stated its rationale for facilitating these contracts, saying it has spoken with people affected by attacks and that prediction markets “gave them answers in ways that TV news and X could not.”
In response to the surge in popularity of these contracts, a group of 12 senators issued a formal challenge this week, alleging that they violate federal prohibitions on event-based derivatives tied to war or assassination. The American Gaming Association also criticized the listings, stating that markets involving armed conflict would never receive approval under state or tribal gaming jurisdictions.
Polymarket operates under a special set of regulations because it was prevented from serving the U.S. market until recently, when it reached an agreement with the Commodity Futures Trading Commission. Because of this, its rivals, like Kalshi, are unable to list contracts referencing military invasion or action.
However, Polymarket is now moving toward a regulated U.S. launch after acquiring a domestic exchange approved by federal authorities.
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Disputed Maduro capture triggers million-dollar settlement conflict
A significant dispute erupted this month after Polymarket declined to pay out $10.5 million in bets related to the removal of Nicolás Maduro in Venezuela. While American special forces successfully seized the leader on Jan. 3, the platform ruled that the specific operation did not meet the technical definition of a military invasion.
Before the capture, Polymarket contracts on Venezuela and Maduro had been gaining substantial traffic. One newly created account invested $30,000 just hours before the raid, netting a calculated profit of $436,759. This well-timed activity triggered accusations of insider trading and prompted calls for new federal legislation to ban government officials from participating in such markets.
Despite the windfall for those betting on Maduro's exit, users who wagered on a U.S. invasion saw their contracts collapse. The platform clarified that the "snatch-and-extract" mission was a targeted raid rather than a military operation intended to hold territory or establish territorial control.
The decision has sparked an outcry among users, who argue that the ruling is arbitrary and ignores the reality of the regime change.
