Sokipiriye Dokubo
Polymarket, a platform utilizing blockchain for prediction markets, is reportedly looking to gather $50 million in a new funding round, driven by the growing interest in betting on U.S. elections. Based in New York, the startup is also contemplating the introduction of its own token, according to insights from The Information. This proposed token would enable users to confirm the results of various real-world events, although its exact relationship with the UMA Protocol, which is the current oracle used by Polymarket, is not yet defined.
Exploring a Potential New Token and Its Implications
According to unnamed sources featured in The Information, Polymarket is investigating the release of its own token. Should this initiative proceed, contributors to the funding round might be granted warrants to buy the token in the future. However, detailed mechanics of how the token will work or its broader implications for the platform have not been clearly outlined.
The token is suggested to function as a method for users to authenticate event outcomes within Polymarket’s offerings. There is still ambiguity on whether this new token would merely supplement or entirely replace the UMA Protocol, which currently handles the determination of market results and conflict resolution via community voting. Despite these uncertainties, UMA’s token value has not seen any significant negative effects and even experienced a slight rise following the announcement. Notably, Polymarket’s platform is described as “oracle agnostic,” suggesting it can evolve with various oracle technologies.
As of now, neither Polymarket nor UMA has acknowledged requests for comments from CoinDesk.
Polymarket’s Remarkable Growth in 2023
This year has been marked by significant advancements for Polymarket. In May, the company disclosed it had secured $70 million through two funding rounds: one for $25 million and another for $45 million, the latter led by billionaire investor Peter Thiel’s Founders Fund.
The report from The Information did not clarify whether the anticipated $50 million funding would involve equity, token warrants, or otherwise. There also were no updates on the current valuation of the company.
Polymarket has established itself as a key player in both the prediction market and the wider cryptocurrency sector. Transactions on the platform are conducted via smart contracts on the Polygon blockchain, with settlements made in USDC, a stablecoin fixed to the U.S. dollar. The platform achieved record monthly trading volumes, reaching $472 million in August, with September also proving strong, amassing $397 million in trades by mid-month, according to Dune Analytics.
Users can place bets on diverse topics ranging from global incidents to sports and geopolitical issues. However, the platform’s most prominent market has undoubtedly been wagers on the U.S. presidential election, with a total of nearly $1 billion staked by users.
Facing Regulatory Hurdles and Competition
Despite its growth, Polymarket encounters regulatory challenges. Following a settlement with authorities, the platform now restricts access to users with U.S.-based IP addresses. However, reports indicate some American users have circumvented these barriers using virtual private networks (VPNs).
Polymarket’s success has attracted attention from competitors, especially Kalshi, which operates as a regulated prediction market in the U.S. Kalshi has been involved in a prolonged legal confrontation with the U.S. Commodity Futures Trading Commission (CFTC) in its efforts to permit contracts regarding which party will control the U.S. Congress. The CFTC is currently considering a ruling that might prohibit election event contracts across all monitored exchanges, potentially subjecting these bets to state laws instead.
CFTC Chairman Rostin Behnam has recently expressed concerns regarding offshore betting platforms like Polymarket that cater to U.S. clients despite regulatory constraints. This suggests that heightened regulatory oversight could be on the horizon for Polymarket and similar trading platforms.