Review of the doubts surrounding Polymarket: The bigger the fire, the calmer we should be

Written by Yangz, Techub News

Polymarket is undoubtedly the most popular Web3 application behind this US election. While major mainstream media such as the Wall Street Journal were still predicting the voting results in key swing states, this decentralized prediction market founded by 26-year-old "prodigy" Shayne Coplan made the judgment of "Trump's victory" in advance. In the past few days after the election "dust settled", there has been a discussion in the circle about whether Polymarket belongs to the Ethereum ecosystem, hoping to save some "face" of the Ethereum ecosystem by taking advantage of the popularity of Polymarket.

Although Polymarket is sought after by many bigwigs such as V God and is regarded as a "truth machine", the platform has also been subject to various controversies. This article aims to take stock of the various doubts surrounding Polymarket, hoping to look at this platform rationally. After all, the more popular it is, the more calm you have to be.

Political stance of founders and investors

First, the political stance of Polymarket founder Shayne Coplan and the platform's main investor Peter Thiel was questioned.

Teddy Schleifer, a reporter for the New York Times, posted a group photo on Twitter on July 20. In the photo, Shayne Coplan, with curly hair, stood out among the Republican representatives wearing suits and combed back hair. Other people in the photo include Trump's eldest son Donald Trump Jr. and Trump supporters such as Omeed Malik and Shervin Pishevar. According to the time, the photo should have been taken during the Republican National Convention.

In addition to Shayne Coplan himself, the main investor of the prediction market platform, PayPal co-founder and Founders Fund founder Peter Thiel, who is an open Trump supporter, has also attracted questions about his "political bias".

Although Shayne Coplan has responded to the relevant questions, emphasizing that Polymarket adheres to a non-partisan stance and is not a political tool, and that Peter Thiel has no board seat and no so-called control, can this response really eliminate people's doubts?

There are actually some reports on this matter that cannot be ignored. According to Politico and its reporter Daniel Lippman, Shayne Coplan not only appeared at the Republican National Convention, but also hosted a post-conference party for the Democratic National Convention. In addition, Coplan also took a photo with Tim Walz, the Democratic vice presidential candidate and governor of Minnesota, at a Harris campaign fundraiser.

So, in addition to the possible factor of "political stance", Shayne Coplan's actions may also be just to promote Polymarket, just a pure "advertising offensive". As Bloomberg reported, Polymarket has spared no effort to get out of the circle. The platform once distributed baseball caps with its own brand to attendees during the Republican National Convention and hired people (paid $1,050) to act as human billboards for publicity. Earlier this year, Polymarket also posted boxing-themed championship posters in Manhattan to promote Trump's election odds against Biden. In addition, the platform announced in July that it had hired Nate Silver, a well-known political polling analyst, as a consultant.

"Real money betting may also be capital manipulation"

In addition to questioning the founder's political stance, the market also questioned whether there is "capital manipulation" in the Polymarket election prediction market. On October 18, the Wall Street Journal published an article saying that Trump's leading position on Polymarket was actually a "momentum" for capital. It pointed out that this surge may be a "false impression" caused by four Polymarket accounts. Miguel Morel, CEO of blockchain analysis company Arkham Intelligence, also said after review that the four accounts belonged to the same entity. For a time, the market was in an uproar.

However, according to the latest report, this "giant whale" is a French investor who calls himself Théo. In an interview with the Wall Street Journal, he pointed out that he had lived in the United States and worked as a trader in several banks before. Théo said that there was no "political stance" behind his huge bet, he only wanted to "make money", and most of the invested funds were "available liquid assets". In addition, Polymarket also stated that after conducting an investigation, the company concluded that the trader made bets based on "personal views on the election" and did not find any information indicating that the user manipulated or attempted to manipulate the market.

"Watered Trading Volume"

After the official "ruled out" the above possible "capital manipulation" doubts, is Polymarket really more reliable than traditional polls because it is "real money betting" as Elon Musk said?

In fact, the public has also raised doubts about the real trading volume of the platform. Blockchain risk analysis company Chaos Labs released a report stating that about one-third of the trading volume in presidential predictions alone may be wash trading, while Inca Digital found that the presidential election prediction trading volume reported on the Polymarket website did not match the on-chain data. Inca Digital said that the actual trading volume of the presidential election prediction market was about $1.75 billion, while the figure reported by Polymarket was $2.7 billion.

For this matter, the author has not yet found a response from Polymarket. Wash trading is actually very common in Web3 applications. In addition to the fact that the platform itself may conduct dark operations for more glamorous data, the charm of "airdrops" will also attract many Degens to come and "ambush" in advance, forming a false prosperity. In September this year, The Information quoted sources as saying that Polymarket was considering raising more than $50 million through token issuance, but Polymarket has not yet made a final decision and there is no clear timetable for token issuance.

If "wash trading" is no longer surprising, should it be the same for Polymarket, which is laying out the prediction market track? In my opinion, this practice actually endangers the nature of the prediction market. When a large number of fake users pour into the prediction market, their choices do not represent the real market sentiment. If the odds are almost the same, they will make a choice at will, but if there is a large gap in the odds, due to the characteristics of degens, they may think a little and invest in the party with even a 10% chance.

"On the surface, they obey the supervision, but in fact, they act recklessly"

In January 2022, Polymarket was fined $1.4 million by the U.S. Commodity Futures Trading Commission (CFTC) for "operating in the United States without registration." As part of the settlement agreement, the company promised to gradually stop its services in the United States and prohibit U.S. users from accessing it.

However, the fact is that in addition to a large number of American users who can still continue to access the website through VPN and other means, according to Bloomberg, Meta's advertising library shows that Polymarket owner Blockratize recently spent about $269,875 on Facebook and Instagram to run election ads to millions of American users. In addition, Armand Saramout, senior development director of Polymarket, sought a sponsorship agreement with American social media KOLs in September. In the past few weeks, Instagram bloggers with a large number of fans have been using tags such as #PMPartner and #PolymarketPartner to post Polymarket sponsored content. Although a Polymarket spokesperson confirmed that the move was not intended to stimulate transactions among American visitors, it always gives people a feeling of "obedience on the surface, but recklessness in reality."

Summary

Polymarket's emergence is definitely a boon to the Web3 industry, and we also look forward to this decentralized prediction market platform becoming an "alternative news source" or "the future of media" as Coplan said. However, what Polymarket needs to consider now is that the US election is settled. After losing such a hot topic, how should it develop in the future? Perhaps launching a token will be one of the ways it considers to maintain growth, but even if a token is launched, please don't forget the mission of providing the public with more accurate and real-time event predictions.