What Is Polymarket? How the Prediction Market Platform Works

Polymarket is a prediction market platform built on blockchain technology that allows users to bet on the outcomes of real-world events. These events must be unambiguously verified — either they happened, or they didn’t — and can pertain to virtually any subject, including sports, technology, pop culture, geopolitics and even the weather. Participants buy shares tied to specific outcomes (priced between $0 and $1), reflecting the market’s estimate of the probability that a given event will occur. Once the outcome is resolved using a predefined, verifiable source, winning shares pay out and losing shares become worthless.

Founded in 2020 by American entrepreneur Shayne Coplan, Polymarket faced some initial regulatory challenges in the United States in 2022, with the Commodity Futures Trading Commission (CFTC) effectively banning the platform, claiming it failed to acquire proper registration. However, not long after the U.S. Justice Department and the CFTC closed their investigations, the CFTC granted the platform permission to operate as a “federally regulated U.S. exchange.” Still, Polymarket continues to face scrutiny, and the exact scope of its authorization and compliance obligations in the U.S. remains in flux.

Here’s an overview of Polymarket, including how the platform works, the technology behind it and how it differs from traditional investing.

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What Is Polymarket?

Polymarket is a prediction market platform that enables users to purchase and trade shares in the outcomes of events. The price of each share reflects what other users believe is the probability that a specific event will occur. Users can then inform their decisions with real-time snapshots of public opinion on how different scenarios are likely to play out. 

Throughout this process, Polymarket encourages a decentralized, peer-to-peer approach. Instead of acting as a bookmaker that sets the odds to maximize its profits, it collects a fee on each transaction. It also matches users who make corresponding predictions, so users trade directly with each other rather than against the “house.” Polymarket never stores users’ funds, either. Instead, users store their funds in digital wallets, retaining control of their shares from the moment they buy them until they sell them. 

What Are Prediction Markets?

Prediction markets are platforms that let users buy and sell shares in the outcomes of future events. In a prediction market, the share price represents the probability of an event occurring. So, if the price of an event share is $0.70, that means there’s a 70 percent chance of that event happening. Any user who believes there’s a 70 percent chance or better of this event occurring would then be incentivized to buy “Yes” shares. 

Of course, conditions can change rapidly and drastically, so prediction markets give users the option to sell their shares at any time. This approach is designed to improve the accuracy of share prices, reflecting the most up-to-date event probabilities. As a result, users can interpret share prices as the collective prediction of other users who also have money at stake, lending more credibility and objectivity to the process.

How Does Polymarket Work?

Users buy “Yes” or “No” shares, representing the binary outcome of an event either occurring or not occurring. Because the share price reflects what other users think the probability of something happening is, it falls between $0.01 and $1. For instance, if users believe there’s a 40 percent chance an event will happen, “Yes” share prices will be $0.40. That said, share prices can fluctuate constantly up until the official result, and users can sell their shares at any time. The final value is always $1 for winning shares and $0 for losing shares.   

Polymarket requires all transactions to be conducted in a cryptocurrency called USDC.e, a bridged version of USD Coin (USDC). USDC is a type of stablecoin known as a “fiat-backed” stablecoin — a cryptocurrency with a value pegged 1:1 to another currency issued and backed by a government. In this case, the fiat currency is the U.S. dollar. This approach addresses some of the volatility associated with cryptocurrencies in general, and contributes to Polymarket’s reputation as a more reliable crypto-based platform.

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What Technology Powers Polymarket?

Polymarket is built on Polygon, a blockchain platform designed to accelerate Ethereum transactions and reduce related fees. Polygon acts as a sidechain to the Ethereum platform, processing transactions in parallel with Ethereum. This approach distributes transactions across multiple chains, allowing Polymarket to handle a larger volume of transactions without requiring more energy or congesting the Ethereum network with excessive traffic. 

For security, Polymarket uses a proof-of-stake consensus mechanism, meaning that users must stake a certain amount of coins to become validators who review and verify transactions, earning crypto for each validated transaction. All transactions are also executed via smart contracts and recorded directly on the blockchain to foster trust among Polymarket users. In addition, Polymarket promotes transparency by using a central limit order book (CLOB) to match corresponding bets when users buy shares and record any successive transactions.

What Types of Questions Are Traded on Polymarket?

Polymarket users can buy shares in “Yes/No” questions across a variety of topics, including sports, geopolitics, technology, pop culture, finance and weather forecasting. These questions offer two or more options in a multiple-choice style. Here are several examples of questions previously featured on the platform: 

• “U.S. forces enter Iran by…?” 
  • March 31
  • April 30 
  • December 31 
• “2026 NCAA Tournament Winner” 
  • Michigan
  • Arizona 
  • Illinois 
  • Connecticut 
• “#2 Free App in the U.S. Apple App Store on April 3?” 
  • Claude by Anthropic 
  • Google
  • NCAA March Madness Live
  • MLB
  • Freecash - Get Paid Real Money
  • ChatGPT
  • The White House
  • Threads 
  • Google Gemini  
• “‘The Super Mario Galaxy Movie’ Rotten Tomatoes score?” 
  • 45+ 
  • 50+ 
  • 55+
  • 60+
• “Over 250 U.S. flights canceled on April 1?” 
  • Yes
  • No 

Questions can vary based on simple yes/no answers, categorical answers or answers tied to a numerical range. However, all questions must have an outcome that can be verified, leaving no gray area for multiple interpretations of the final result. 

How Do Users Participate in Polymarket Markets?

To get started with Polymarket, users must complete the following steps: 

1. Visit Polymarket’s website and sign up for an account with an email address. Polymarket will provide an Ethereum wallet, along with private keys to access it. 
2. Deposit USDC.e into the Ethereum wallet to have funds available for use.  
3. Approve the necessary exchange contracts. 
4. Set up the required API credentials tied to the digital wallet. 
5. Browse markets and choose one to participate in. 
6. Buy an amount of shares. Each share will cost between $0.01 and $1. 
7. Trade the shares at any time, or hold onto them until the outcome is determined. 
8. After the outcome is resolved, continue trading funds or store them in the wallet. 

Remember, the final share price will be $0 or $1, reflecting the unambiguous nature of an event that either occurs or doesn’t. Each market will list specific conditions for an event to occur, and Polymarket has its own mechanism for resolving markets and removing any uncertainty from the final result.

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How Are Prediction Markets Resolved? 

Prediction markets are resolved when a result becomes unambiguous. In Polymarket, results are finalized using the Universal Market Access (UMA) Optimistic Oracle, a service that connects smart contracts on the Polymarket platform to real-world data. This way, smart contracts can be executed according to real-time data. The oracle is “optimistic” because it assumes that any final result in a market is true, unless a user stakes tokens to dispute it within the challenge period immediately after an outcome is determined.  

If a user challenges the outcome, the dispute is escalated to UMA’s data verification mechanism (DVM), which calls for a vote among UMA tokenholders that can last between two and four days. Once the voting window closes, those who voted in the majority earn rewards. This system incentivizes other users to participate in votes, ensuring a collective, human element remains part of the verification process. 

How Is Polymarket Different From Traditional Forecasting Platforms? 

Polymarket allows users to trade shares before an outcome is finalized, whereas traditional forecasting platforms often require users to hold onto any shares they purchase. Any trades before an outcome impact share prices and reflect users’ shifting confidence in the probability of an event occurring, enabling public opinion to play a much larger role on Polymarket than traditional platforms. And while users often bet against the house on traditional forecasting platforms, Polymarket pairs users with corresponding bets, supporting a peer-to-peer system.  

Another key distinction between Polymarket and traditional platforms is the use of blockchain technology. Transactions on Polymarket are executed in cryptocurrency via smart contracts, allowing them to be verified and recorded directly on the blockchain. Every transaction is then visible to and confirmed by other users, contributing to Polymarket’s transparency and collective ethos. Meanwhile, traditional platforms often use fiat currencies like the U.S. dollar, though many are now incorporating blockchain features. 

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