France's National Gaming Authority is considering blocking access to Polymarket, the cryptocurrency prediction platform that processed $3.6bn in trading volume during the US presidential election. Polymarket is the leading blockchain prediction market. So it’s a big deal for the industry.
The regulatory scrutiny follows a series of high-profile wagers on the platform, including a French trader who secured a $47m payout after correctly predicting the election outcome, according to French media outlet The Big Whale.
Why Is Polymarket Under Fire?
The blockchain-based platform saw unprecedented activity during the election period, processing $294m in trades on November 5 alone. Total open interest reached $463m on election day, marking a 40 per cent increase from the previous week.
Regulatory concerns center on compliance with French gambling legislation. The gaming authority holds powers to restrict domain access and pressure media outlets that link to the platform, though users may circumvent restrictions through virtual private networks.
The platform has attracted broader regulatory attention already.
The US Commodity Futures Trading Commission began investigating Polymarket in 2021 and has proposed rules targeting prediction markets over manipulation risks.
Despite regulatory challenges, the platform has secured significant backing, including investment from Ethereum co-founder Vitalik Buterin. Polymarket has raised $74m from early investors, though it remains inaccessible to US users.
The platform's technology allows direct cryptocurrency wagering without traditional betting intermediaries. While Polymarket maintains control over betting proposals, potential decentralization through a token launch could alter this structure.
Market data indicates the platform's growing influence in political forecasting.
Polymarket correctly signaled major political developments weeks before they occurred, including significant changes in the presidential race.
The French regulator has not announced a timeline for potential restrictions. The authority's decision could set precedents for cryptocurrency prediction markets in other jurisdictions.
Trading volumes suggest sustained user interest despite regulatory uncertainty. The platform's election market represented its largest by volume and open interest to date.
What Are Decentralized Blockchain Prediction Markets
Decentralized prediction markets are blockchain-based platforms where users bet on future events.
They work like traditional betting markets, but without centralized control. So you can make bets without intermediaries. Just like Bitcoin could be compared to a traditional currency in a way, yet it has a totally different technology running beneath the surface.
Users can create markets on virtually anything, from political outcomes to sports results, and even niche topics like movie box office performances or scientific breakthroughs.
The concept isn't new.
Prediction markets have been around for decades.
But blockchain technology has given them a new lease on life, addressing many of the limitations of their centralized predecessors.
These markets run on blockchain networks using smart contracts. Users buy and sell shares representing outcomes. Prices fluctuate based on market sentiment, reflecting the crowd's collective forecast.
People create bets on some events or outcomes with «Yes» and «No» options. If you think it will happen this way, you buy "Yes" shares. If enough people agree, the price of those shares goes up. The current price at any given time represents the market's estimate of the probability of win.
And there are no human intermediaries. Smart contracts automate the entire process.
They handle bets, distribute winnings, and settle disputes without human intervention. This automation reduces costs and eliminates the need for trust in a central authority.
Also, the blockchain's transparency ensures all transactions are visible and verifiable. This openness is a stark contrast to traditional prediction markets, where the inner workings are often opaque, which disrupts the trust to the whole platform.
There are no bookies here, no one can directly or indirectly influence the process, and thus decentralized prediction markets are supposed to be a much more fair game.
How Can Polymarket Scrutiny Influence the Future of Prediction Markets?
There is a number of issues which critics usually name as the main drawbacks of decentralized predictions markets. Among them you can find reliance on accurate oracles (if the data feed is compromised, the entire market is at risk), liquidity issues (some niche markets may not attract enough participants to function efficiently) and smart contract risks (bugs in the underlying code could lead to significant losses for participants).
None of that is an issue in case of Polymarket, the most well-established blockchain prediction platform out there.
Its software is accurate and flawless, there are millions of participants and absolutely no problems with liquidity whatsoever. Nobody has ever accused Polymarket in market manipulations of any kind.
Now, there is another potential problem with prediction markets. And it seems like Polymarket is about to hit the wall right here.
Regulatory uncertainty. The legal status of these markets is often unclear, particularly when it comes to events like political elections. So France is about to become the first of the decentralized predictions markets to test the uncharted waters of the legal hurdles.
What happens in France now, after the Trump election win and Polymarket big gambles may define the future of the decentralized markets.
As we mentioned above, the US Commodity Futures Trading Commission began investigating Polymarket in 2021. The authorities have proposed rules targeting prediction markets over manipulation risks. Yet, none of those has been applied yet.
The French National Gaming Authority has not announced a timeline for potential restrictions regarding Polymarket. Nor have they announced the exact measures they would like to apply, aside from potentially blocking the access to the service inside the country.
Anyway, the authority's decision could set precedents for cryptocurrency prediction markets in other jurisdictions.