Polymarket: when bets become market signals

Born as a platform for betting on virtually anything, Polymarket has evolved into a crypto-based prediction market.

In just a few years, what started as a niche betting platform has grown into a multi-billion-dollar information infrastructure, closely watched by financial operators, institutional investors, and even governments. Yet between collective forecasting, manipulation risks, and markets on armed conflicts, the line between utility and danger remains thin.

What Polymarket is and how it works

Polymarket is a global crypto-based prediction market platform headquartered in Manhattan. It allows users to take positions on the outcome of future events: elections, macroeconomic data, regulatory decisions, sports events, and geopolitical developments. It was founded in 2020 by Shayne Coplan, then a 21-year-old student at New York University.

Its mechanics are straightforward. Each event is structured as a binary market (“Yes” or “No”), with prices expressed in cents on the dollar: if a contract trades at 0.65, the market is assigning a 65% probability to that outcome. Buying 100 shares at that price means committing 65 units of collateral, which become 100 if the event occurs, or zero otherwise.

There is no central counterparty. Shares are exchanged peer-to-peer via smart contracts on Polygon, which hold funds and automatically execute payouts.

A frequently overlooked aspect is outcome resolution. Polymarket relies on UMA (Universal Market Access), a protocol that brings real-world data on-chain in a verifiable and disputeable way. Anyone who disagrees with a resolution can challenge it by posting a bond, and the final outcome is determined through decentralized voting.

This model reduces reliance on a central authority, but does not eliminate ambiguity: translating reality into a binary outcome inevitably requires simplification.

Explosive growth

In 2024, cumulative volume surpassed $9 billion, with a monthly peak of $2.63 billion in November. Active traders reached 314,500 in December, while open interest climbed to $510 million during the U.S. elections. More than $3.3 billion flowed through the presidential race alone.

By 2025, the sector reached $44 billion in total volume, with Polymarket and Kalshi accounting for the majority. This growth has attracted major institutional capital. In 2024, investors included Founders Fund (Peter Thiel) and Vitalik Buterin. In October 2025, Intercontinental Exchange - parent company of the NYSE - invested $2 billion, valuing the platform at $9 billion.

Beyond the numbers, the key shift is perception: Polymarket is no longer seen merely as a betting platform, but as an infrastructure capable of generating signals monitored by financial professionals and analysts.

Why prediction markets matter to professionals

The answer lies in the quality of the information produced. Polymarket does not collect opinions - it aggregates expectations backed by real capital. Participants risking their own money tend to be more disciplined than survey respondents, and prices rapidly incorporate dispersed information, perceptions, and incentives from thousands of users.

However, this value is not evenly distributed. While many contribute to price formation, the ability to interpret and monetize those signals remains concentrated. Prediction markets do not replace professional analysis - they can complement it, particularly in tracking how consensus evolves. The signal is collective in form, but often asymmetric in substance.

The Problem of manipulation

Polymarket’s informational relevance should not be confused with neutrality or automatic reliability. Three distinct issues are worth highlighting:

• First, limited liquidity in specific markets. While the platform overall shows high volumes, individual events may remain thinly traded, allowing well-capitalized actors to significantly influence prices.
• Second, position concentration. A price may appear to reflect the “wisdom of the crowd” while actually being driven by a small number of participants, creating a misleading sense of objectivity.
• Third, insider trading. If some participants hold non-public information, the market ceases to be predictive and becomes a venue where informational advantage translates directly into profit.

There is also a less obvious effect: in liquid and widely observed markets, Polymarket signals can become self-fulfilling, shaping behavior toward the predicted outcome.

This dynamic is strongest where expectations influence results - politics and financial markets - and largely absent where outcomes are independent of sentiment. For example, during the 2025 conclave, with no influence from bettors, prices mainly reflected speculation, offering limited predictive value.

A notable case occurred during the 2024 U.S. elections. According to the Wall Street Journal, price movements favoring Trump were driven by just four bettors holding around $30 million in positions, later linked on-chain to a single entity. Polymarket confirmed it was a French trader, who ultimately made $85 million after Trump’s victory.

The case does not prove illegal manipulation, but it shows that even with full on-chain transparency, markets can be driven by a few actors while appearing broadly representative.

When markets intersect with geopolitics

Polymarket’s informational role becomes more controversial when it touches armed conflicts. The issue is not only whether the market correctly anticipates outcomes, but what incentives it creates for those with access to sensitive information.

According to press reports, some members of the Israeli Air Force were investigated or charged for betting on Polymarket regarding the timing of strikes on Iran during the so-called “Twelve-Day War” in 2025. One officer allegedly shared classified information with a colleague to generate profits. During questioning, he reportedly stated: “The entire squadron is on Polymarket - the whole Air Force is betting.”

The broader point is clear: when markets reward accurate predictions about militarily sensitive events, secrets and national security decisions risk becoming profit opportunities.

Infrastructure and Regulation

In April 2026, Polymarket announced its largest infrastructure upgrade: a new trading engine, new smart contracts, and a new collateral token, Polymarket USD, pegged 1:1 to native USDC issued by Circle. This replaces USDC.e, the bridged version on Polygon, along with its associated costs and vulnerabilities.

The governance token POLY was confirmed in October 2025, though no official launch date has been announced. On the regulatory front, following a settlement with the CFTC in 2022, Polymarket restricted access in the United States until 2025. In Europe, several countries have adopted restrictive measures, including Switzerland, France, Poland, Singapore, and Belgium.

Italy presents a notable case: at the end of 2025, the customs and gaming authority ordered the site to be blocked. While it later became technically accessible again, trading functionality remains effectively unavailable to Italian users.

This dual layer reflects a broader challenge: existing regulatory frameworks struggle to classify a tool that simultaneously functions as a betting platform, a financial market, and a global information infrastructure.

Conclusion

Polymarket cannot be reduced to either a simple betting site or a pure tool of collective intelligence. It is a system where expectations, capital, and technology intersect, generating both informational value and new forms of risk.

Its strength lies in turning dispersed expectations into observable prices. Its weakness is that those prices may be interpreted as objective signals even when they reflect concentration, informational asymmetries, or distorted incentives.

Ultimately, the question is not whether Polymarket works - but under what conditions it produces useful information, and when it instead contributes to distorting it.