One of this year’s most anticipated events—the U.S. presidential election—is approaching rapidly. With Vice President Kamala Harris and former President Donald Trump locked in a close race, Polymarket, the Web3 prediction market platform, is experiencing a surge in activity like never before.
In October, the platform registered a record trading volume of $2.4 billion. This reflects not only such (literally) high-stakes event as the U.S. election, but also Polymarket’s own rising popularity.
Indeed, compared to the 2020 election, Polymarket’s trading volume has grown by a factor of 47. The number of monthly active traders skyrocketed from slightly over 2,000 four years ago to over 214,000 now (source: Dune Analytics).
Polymarket is one of the notable real-world applications of blockchain technology. Its decentralized nature allows for cost-effective, accessible, and 24/7 trading.
Its primary user base comes from the crypto community, a trend underscored by a notable skew toward pro-Trump bets. While official polls suggest a close race, 65% of Polymarket wagers currently back the Republican nominee, reflecting the community sentiment. Yet, the platform is also gaining traction beyond the crypto crowd, surfing on the election betting fever.
This surge in interest is a good thing for overall crypto adoption, but Polymarket’s success isn’t without controversy, including wash trading allegations and an ambiguous legal standing in the U.S.
How Polymarket works
Polymarket is a Web3 platform allowing users to buy and sell shares in probabilities of real-world events, from elections to sports outcomes. It's built on Polygon, an Ethereum layer-2 allowing faster and cheaper transactions. Its smart contracts automate transaction execution, ensuring transparency and security.
Unlike traditional betting platforms, Polymarket doesn’t act as the “house” or take opposing sides, thus canceling the risks of potentially unfair usage of the house knowledge. It is a purely peer-to-peer (P2P) marketplace where prices are determined by supply and demand. Prices on the platform reflect collective probabilities, shifting as users buy and sell shares, much like a stock market. All trades are denominated in USDC, a stablecoin pegged to the U.S. dollar.
Since users maintain control of their funds through self-custodial wallets, Polymarket does not access users’ private funds.
Being decentralized, it's globally accessible, with the exception of the U.S. After a $1.4 million fine from the country’s Commodity Futures Trading Commission (CFTC) for offering event-based contracts, the platform reduced its services in the U.S. while expanding globally.
Controversies around Polymarket
A recent Fortune article brought attention to controversies surrounding Polymarket. Analysts from blockchain firms Chaos Labs and Inca Digital reported signs of wash trading on the platform. Wash trading is a form of market manipulation where shares are bought and sold repeatedly to inflate the platform’s volume. Such practices are generally banned in traditional finance as they can create misleading signals about actual demand. According to the analysts, up to a third of Polymarket’s volume was artificially boosted.
The company’s representatives responded by pointing out the transparency of their platform – which allowed the researchers to detect such patterns. Some speculate that such activity could be linked to "airdrop farming," where users engage in high-frequency trades to qualify for potential token giveaways. Since Polymarket charges no transaction fees (only small amounts paid to liquidity providers), the platform’s structure may encourage this practice.
Though Polymarket has yet to issue its own token, speculations around its possible launch remain. Issuing a token could be a way for the platform to boost its activity, attract new users, and reward the existing ones.
Polymarket also previously faced scrutiny over a "whale" trader who reportedly boosted Donald Trump’s odds on the platform. However, these trades could also be strategic rather than an attempt to influence market sentiment.
Amid these controversies, Polymarket has drawn interest beyond the crypto community. Coverage in mainstream media outlets such as Newsweek, The Wall Street Journal, Vox, and Fortune is raising awareness and attracting new users, with many opening crypto wallets to join. The election betting fever helps drive broader crypto adoption, exposing non-crypto audiences to Web3 applications that are straightforward and relevant to everyday interests.
One major unresolved issue is Polymarket’s compliance in the U.S. Despite appointing a former CFTC head J. Christopher Giancarlo on its advisory board in 2022, the platform remains restricted in the U.S. With both Trump and Harris signaling support for a more favorable regulatory environment for crypto, Polymarket could hope for an eventual approval in this key jurisdiction.