Inside Polymarket: The Wild and Unregulated Internet Culture Stock Exchange
It's the New York Stock Exchange for Pop Culture. It's also fully unregulated and anonymous.
In the era of declining trust in traditional media and hyper-personalized social media echo chambers, an objective understanding of American politics seems to be a relic of a bygone era. Polymarket, a new cryptocurrency app, aims to change that by creating a marketplace of predictions.
The app functions like a New York Stock Exchange for politics, pop culture, and sports-related outcomes. You can buy shares in Kamala Harris winning the presidential election, or shares in which actor you think will play James Bond next. Polymarket, the most popular prediction market app, describes itself as “your opportunity to profit from the things you know best.”
In addition to being a profit opportunity for internet culture nerds, Polymarket has become an empirical complement to a news media prone to human bias. Want to see how Trump’s assassination attempt affected his reelection chances? Or how the announcement of Tim Walz as VP on the Democratic ticket changed their prospects in swing states? Polymarket has the chances set by millions of online traders in real-time. For example, the odds of Trump winning the election after his assassination attempt jumped to an all-time high of 72% of the now $569 million market for the 2024 US presidential election, before stabilizing. These numbers closely matched the polling data that came out several days later. Polymarket users knew first.
Started in 2020, Polymarket is growing rapidly. According to the internet analytics tool SimilarWeb, its web traffic has grown by approximately 80% in the past few months, reaching millions of users. The company recently hired superstar election forecaster Nate Silver, and announced a partnership with Substack, the writing platform Humanlike is published on.
Multiple Polymarket users I interviewed for this story say they discovered the platform in June of 2023 when underwater exploration company OceanGate’s Titan submersible went missing, and a market was created on Polymarket to allow users to bet on whether it would survive. Screenshots of the market went viral on X, with one user sarcastically asking, “what stage of capitalism is investing in someone’s death”. The angry post included a screenshot of the market graph. Unfortunately for the poster hoping to direct ire at the company, Polymarket’s graphs have massive brand watermarks with the website name, which turned the hate tweet into a viral advertisement and, consequently, the app’s first growth spike.
In the niches of academia and Silicon Valley, prediction markets have existed for a long time. Within these communities, a group that refers to themselves as ‘rationalists’ have been evangelizing the technology. Rationalism, originally attributed to the 17th-century philosopher and mathematician René Descartes, is the idea that "any view appealing to reason is a source of knowledge or justification" per Wikipedia. Rationalists love prediction markets because they offer a quantifiable way to assess beliefs and predictions. The popular rationalist blog Astral Codex Ten (formerly Slate Star Codex), and the rationalist economics professors Tyler Cowen and Robin Hanson regularly write about their findings from prediction market data.
Rationalists I spoke to said that the rationalist affinity for prediction markets started with their use to rate social sciences research, which they theorized could solve the ongoing “replication crisis” by allowing groups of experts to judge studies. They also evidenced that, since their introduction by the economist Friedrich Hayek, prediction markets have been used by the Department of Defense to analyze policy plans, used by Google to estimate the feasibility of product launch plans, and used by Eli Lilly to make estimates about infectious disease growth.
Polymarket has successfully made prediction markets a mass market product available to anyone with an internet connection and a cryptocurrency wallet. Over $568 million in bets have been placed on the question of who will win the upcoming US presidential election, and the company has received over $70 million in venture funding, led by Peter Thiel’s Founder Fund. However, it is rapidly gaining critics, including Senator Warren and other Democrats, who issued a letter urging the Commodity Futures Trading Commission (CFTC), a regulatory agency, to ban political betting.
The CFTC’s crackdown on Polymarket seems likely. They believe prediction markets are harmful due to the perception that they offer incentives to interfere in word events such as elections. While one of Polymarket’s competitors, Kalshi, is federally regulatory compliant by imposing restrictions on how users can trade, Polymarket has received fines by the CFTC and is considered “unregulated”. For this reason, Polymarket is unavailable in the US, with the “deposit” button on the website gone when users connect from US IP addresses and circumvention a bannable offense under the Terms of Service.
However, their enforcement is minimal. In my research for this article, I was able to create an account on the website from a US-based IP address. When I VPN’d out to South Africa, the “Deposit” button appeared at the top of the screen, inviting me to trade on the platform. VPN usage is unambiguously prohibited within the Terms of Service, yet they appear to not blacklist any VPN or Tor IP addresses.
To circumvent possible financial censorship similar to Operation Choke Point, Polymarket runs on the USDT/USDC cryptocurrency, a decentralized currency that allows users to trade tokens in equal value to the US dollar through anonymous decentralized wallets.
Cryptocurrency exchanges such as Coinbase and financial services apps such as Cash App are regulated by federal law to do Know-Your-Customer (KYC) checks. These platforms often require driver’s license scans, face scans, and a phone number and social security number. Polymarket has none of these requirements.
The result of this is that, in the attempt to evade US government scrutiny over their platform, Polymarket has theoretically allowed tech-savvy users to fully end-to-end anonymize their identity while trading on the platform. I cannot think of how even the most competent federal agencies could determine the identity of a trader who uses the platform with the Tor browser, an anonymous Proton email address, and a wallet of cryptocurrency washed through an anonymous blockchain such as Monero.
This opens the possibility of insider trading and scamming. I could easily imagine White House employees placing bets about Joe Biden’s chances of dropping out after finding out that it would happen ahead of the public, based on classified information. I could imagine terrorist groups gaining funding by trading on events that their violence would disrupt.
Prediction market app users I spoke to were largely unconcerned. One rationalist suggested an economic argument that insider trading has the possibility of making markets more accurate. Another expressed that he hoped markets would adopt KYC to protect themselves from regulators because insider trading would be the “animating factor in the crackdown”, rather than any intrinsic reason to protect the market.
Most of the users I spoke to felt that regulating the exchanges or moving away from crypto and anonymity would diminish their benefits. For example, two sources who lived in Germany told me that they liked Polymarket because Kalshi, the US-regulated competitor, didn’t work in their country.
Polymarket’s lack of regulation and acceptance of anonymity may have been a key to its success. The site’s leaderboard is entirely comprised of pseudonymous users. None of the profiles I visited contained social media handles, means of contact, or personally identifiable information. The highest volume trader, who has spent over $230 million, changes his name frequently and uses a Ryan Gosling profile picture. His X account contains minimal personal details and did not respond to request for comment on this story.
What I heard most from Polymarket users was excitement and optimism. One pointed out to me that in 2022, a massive speculative bubble was created around “web3” companies hoping to make cryptocurrency useful. During this ‘ZIRP’, a time characterized by low interest rates, they took billions of dollars in VC funding, and created essentially zero value. Polymarket might be the first one. In an era of social media feeds that give personalized non-objective views of the world, a loose coalition of people interested in finance, politics, and technology are building a new tool for understanding what people really think and getting rich doing so. One heavy user told me, “I’ve been a Twitter addict for years. It’s really cool that I can make money off that now.”