Nine anonymous cryptocurrency wallets have effectively gained control over who wins and loses on Polymarket's most contested prediction market bets, giving a tiny group of unappointed people outsized power over billions of dollars of wagers.
Over the past year, nearly 2,000 Polymarket financial contracts have been disputed and adjudicated by the company's complicated third-party resolution mechanism - including bets on war, elections and geopolitical conflict. In April alone, 230 contracts that attracted more than $1 billion in trading ended up being decided through the process, up from 79 contracts six months earlier, according to a Bloomberg News analysis of blockchain records and past votes.
Under Polymarket's rules, whenever the outcome of one of its financial contracts faces an official challenge, the dispute goes to a vote among holders of UMA, an independent cryptocurrency. In one recent case, UMA owners voted on how to resolve a contract tied to whether the US and Israel had struck Iranian facilities in February, with the odds bouncing around as traders tried to guess how the UMA holders would vote.
The process was designed to give bettors an open, crowd-sourced path to the truth - central to Polymarket's identity as a decentralized "global truth machine." It has, though, ended up concentrating power in the hands of whoever bought the most UMA tokens, even if they make decisions that defy logic and are motivated by pure economic self-interest, rather than any adherence to the real answer to the question being wagered on.Crypto Tracker
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Just nine wallets accounted for roughly half of all UMA tokens that have voted on a Polymarket resolution over the past three years, the Bloomberg analysis found. That's out of more than 6,400 accounts that have participated in at least one dispute. The nine wallets have essentially always voted together and for the winning position.
The concentration of voting power has drawn blowback from a growing number of unhappy traders who say the system has given the biggest holders the ability to tip votes in ways that serve their own financial interests.
"No serious investor will put money there as long as there's no transparency regarding the resolution criteria," said Jan Czarnocki, general counsel at prediction markets startup Elastics.
Czarnocki lost money on an UMA dispute about US forces entering Iran earlier this year. "Here it's just a discretionary use of power basically."
