WSJ: Unveiling the Secret Jury That Controls Disputes on Polymarket
Last month, Garrick Wilhelm lost a $567 bet on the Polymarket prediction platform about whether a ceasefire would be reached with Hezbollah. When a truce was announced, some traders argued it counted, but Wilhelm disagreed. The dispute was settled not by Polymarket, but by a decentralized group of UMA token holders who vote on such disagreements.
As trading surges, resolving ambiguous outcomes is a growing challenge for prediction markets. Unlike competitors like Kalshi that decide internally, Polymarket outsources dispute resolution to UMA. Its token holders, mostly anonymous and with voting power weighted by holdings, arbitrate cases. Critics argue this system is prone to manipulation, as voters can also bet on the same markets they judge. A Wall Street Journal analysis found that over the past year, at least 60% of active UMA voters had corresponding Polymarket accounts and held positions in disputes they voted on. Voting power is also concentrated among a few large holders.
Polymarket says only 0.2% of bets go to UMA and that the system disperses authority. Its founder has acknowledged flaws and promised fixes. UMA's backers deny any proven manipulation, dismissing critics as sore losers. The platform penalizes voters in the minority to incentivize "correct" outcomes.
Disputes are rising, covering topics from a streamer's pregnancy announcement to Iran. This model also helps Polymarket argue it's an offshore platform outside U.S. regulation, a shift made after a 2022 settlement with the CFTC.
Some losing traders have formed groups to protest, targeting entities like UMA.rocks, which aggregates votes. Its founder says traders often blame UMA for their own mistakes. A recently ousted committee member, Scout, admitted to both betting and voting but argued involved voters research more thoroughly. He highlighted the dilemma: "Either you have conflicted traders deciding, or you have uninformed outsiders voting. There is no perfect answer right now."
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