The rise and rise of Polymarket

Polymarket has been absolutely huge in 2024 with many saying it is the ideal use case for crypto brought to life. Let's see the journey of the platform becoming the centre for Presidential elections..

If you are active in the crypto community, I’m pretty sure you’ve seen at least one screenshot or graphic from Polymarket this year. And I’m nearly certain it is either the Trump v Biden or now the Trump v Harris screenshots. NGL, I have shared a fair share of them myself.

So what is Polymarket and why has it become the absolute centre for tracking the election odds in 2024. And more importantly, has a Web3 project finally - fair and square beaten its Web2 counterparts at something that the end user wants to do?

Welcome, lads and ladies to the mid-weekly edition of the OCT newsletter and after a choppy price week with no substantial crazy event in the market, this week I will share my thoughts on Polymarket - a website you might want to check out (Even if you don’t want to put money in, I don’t).

NOTE: NOTHING EVER MENTIONED IN ANY OF OUR CRYPTO TALK’s POSTS/NEWSLETTERS/CONTENT IS FINANCIAL ADVICE. ALWAYS DO YOUR OWN RESEARCH.

Before anything else - What is it?

Before delving into what it is and how it works and other jargon, I would just like to shed some light on these statistics -

In July 2024, the total monthly volume of Polymarket crossed $275 million while the number of active traders exceeded 33,000, up from June’s $110 million trading volume and nearly 30,000 users. The daily active traders on the platform touched an all-time high of nearly 6,900 on July 22, 2024.

These are really crazy stats for a “betting platform“. Well, sorry to be blunt here but I think a peer to peer prediction market sounds too difficult for most people to understand so I’d rather go with betting platform. And there’s no shame in it. I myself had come up with the same idea back in college some 7 years ago [Oh deary me, could’ve been doing $275M in vol.].

For me betting/prediction/lottery has always been one of the most useful cases of cryptocurrency and smart contracts and its great to see Polymarket leverage that.

So basically, Polymarket allows you to bet crypto on certain real life future events in the field of sports, politics, pop culture or even science. If I need to explain what betting is… well, this is not the article for you.

The History of Polymarket

Found in 2020 by Shayne Coplan, the timing was very good for Polymarket as it was a US presidential year and the platform quickly gained traction. It also had raised $4M in series A with investors like Polychain Capital.

But the US Govt. did what they love doing - interfere. Polymarket got into a legal battle with the U.S. Commodity Futures Trading Commission (CFTC) in late 2021. The platform, caught the CFTC's attention due to its lack of registration as a designated contract market (DCM) or swap execution facility (SEF), which are required under U.S. law for offering binary options. The CFTC alleged that Polymarket was facilitating unregistered swaps, leading to an investigation and eventual enforcement action against the platform.

Eventually in early 2022, Polymarket reached a settlement with the CFTC, agreeing to pay a $1.4 million fine and to wind down its markets that were not in compliance with regulations. Polymarket’s settlement with the CFTC marked a significant moment in the regulation of DeFi platforms, underscoring the need for these platforms to adhere to existing financial regulations or face enforcement actions.

Fast forward to another presidential year in 2024, may I say - a very significant presidential year for the crypto industry that too. Polymarket raised $45M in series B funding led by none other than Peter Thiel and Vitalik Buterin.

Mainstream media like CNBC mentioning that they look at Polymarket everyday to know the odds of the presidential election. Crazy times.

How does it work?

Polymarket lets users create markets on just about anything, from predicting the next U.S. President to guessing who'll be the next James Bond—because why not? With a little initial liquidity and a lot of creativity, you can decentralize the betting process and make even the most bizarre predictions a reality (oh there have been some snappy ones, including a bizzare one about $ETH reaching $10k 😭).

The market prices fluctuate based on supply and demand, reflecting the "wisdom" of the crowd (and sometimes, their wild imaginations).

Polymarket even shows the odds as dollar values—so if you think Donald Trump has a 70% chance of being re-elected in 2024, Polymarket would display that as $0.70. If you’re right, your $0.70 share becomes $1. If you’re wrong? Well, your share’s value drops faster than a poorly reviewed sequel.

But here’s the kicker: you can place limit orders, too. Say you’re betting on Trump but think his odds might dip to $0.40 due to some wild political twist. You set your limit order, wait for the drama to unfold, and potentially cash in big if your gamble pays off. Because on Polymarket, fortune favors the bold—and sometimes the just plain lucky.

Src: Dune Analytics

Some crazy prediction bets 🤯

• "Will aliens be proven to exist by the end of the year?"
  One of the more outlandish predictions involved betting on whether the U.S. government or any credible source would confirm the existence of extraterrestrial life by a specific date. This market gained traction during a period of increased UFO disclosures and speculation.
  
  Result : I assume it did not go well for the ones wanting to see some ET beings.

• "Will Donald Trump retake the presidency before the end of 2021?"
  Despite Joe Biden being sworn in as President, Polymarket saw significant betting on whether Donald Trump would somehow retake the presidency within the same year. This market reflected the ongoing political uncertainty and the influence of conspiracy theories.
  
  Result : Well, we’re still betting on Trump in 2024, aren’t we?

• "Will the number of COVID-19 cases in the U.S. reach 100 million by a specific date?"
  At the height of the pandemic, Polymarket users bet on the future course of the COVID-19 pandemic, including whether the U.S. would hit grim milestones in terms of case numbers. These bets reflected the anxiety and unpredictability surrounding the pandemic's trajectory.
  
  Result : Nada, in fact for most Americans - covid was a hoax. Still baffles me. Amazing.

• "Will Ethereum’s price exceed $10,000 by the end of 2021?"
  Crypto enthusiasts placed high-stakes bets on Ethereum's price reaching new heights, driven by the massive bull run in the cryptocurrency market. This bet showcased the volatility and speculative nature of the crypto space.
  
  Result : Don’t you dare rub salt on my wounds.

What’s with the latest ban rumours

In an amazing newsletter by Blockworks here, they have a great subheading called = “You cannot ban what’s already banned“ [An ode to house Greyjoy I suppose].

Which is the truth, the CFTC banned Polymarket to have US residents predicting on the platform and Polymarket strictly is against the use of any VPNs so I assume that would mean no one in the US is using Polymarket , right? I suppose that is how it works? Shouldn’t it?

Anyway, the CFTC has not charged Polymarket on breaking its 2022 agreement which would mean -

The rule, if passed, would likely have a greater impact on Polymarket competitors Kalshi and PredictIt, neither of which accept crypto payments. Kalshi is registered with the CFTC but is currently suing the agency for denying contracts for election betting.
- Blockworks

Gemini founders the Windlevoss twins reportedly penned a letter to the CFTC expressing outrage that Americans do not have the right to access these prediction markets, perhaps, not knowing that Polymarket is already banned in the US.

Anyway, personally, I don’t think the ban will make a difference. Without saying much, I guess you know that those who do, do.

Whether you bet on Trump or Harris is a different question altogether and looks like a spicy one right now, since the odds are 49:51 right now, a lot of money will be made and a lot of money will be lost, but of course, that’s what betting is.

That’s it from me in this mid-week edition of the OCT newsletter, will catch up with you on Friday with the “Hodl Up! Week in review”. Stay SAFU.