Learn how Polymarket became a billion-dollar crypto betting juggernaut and what's next for crypto prediction markets.
Polymarket made headlines during the 2024 election by correctly predicting President-Elect Trump’s victory over Vice President Harris. While traditional pollsters anticipated a close contest, the crypto betting platform projected a decisive Trump victory, demonstrating the potential power of decentralized prediction markets. With increasing interest in election betting odds on Polymarket, many are questioning whether such platforms are more reliable than traditional polling methods.
But what is Polymarket, and how did it make such an accurate prediction? How does the technology work under the surface? And what’s next for Polymarket’s US election predictions?
This article covers how Polymarket and other betting platforms work and why they’re poised for more growth over the coming years.
From NYU Dropout to DeFi Innovation
Shayne Coplan’s journey from NYU dropout to prediction market pioneer exemplifies the innovative spirit driving crypto adoption. In 2020, after leaving NYU’s computer science program, he raised $4 million in seed funding from Polychain Capital to build a platform that would revolutionize event prediction through financial incentives.
The platform’s early years were challenging, with only 5,700 monthly active users and less than $40 million in monthly betting volume through April 2024. A further setback came in 2022 when the CFTC fined the company $1.4 million for operating without proper registration, forcing it to restrict access for U.S. users.
2020, running out of money, solo founder, HQ in my makeshift bathroom office. little did I know Polymarket was going to change the world. pic.twitter.com/TktiCXQgXr
Shayne Coplan built Polymarket in a bathroom office. Source: X
The 2024 election cycle marked a turning point.
After accurately predicting Biden’s withdrawal from the race, monthly betting volume surged to $500 million by September 2024. User growth exploded to 200,000 monthly active participants by November, with outstanding bets reaching half a billion dollars. This success attracted the attention of prominent figures like Elon Musk.
The accuracy of Polymarket polls’ predictions drew $70 million in Series A and B funding from notable investors, including Ethereum co-founder Vitalik Buterin and Peter Thiel’s Founders Fund, solidifying its position in the prediction market space. But interestingly, the fund doesn’t charge money to place bets, choosing growth over profitability for the time being.
That said, Polymarket isn’t the only crypto prediction market. Kalshi benefited from a ruling in October 2024 that lifted a pause on its operations and allowed users to trade election-related contracts. Polkamarkets, Hedgehog Markets, Limitless, Drift, Swaye, and Zeitgeist are also hosted on different blockchains.
The Technology Behind Predictive Markets
Decentralized prediction markets represent a clever and sophisticated application of blockchain technology to solve real-world problems.
These platforms use smart contracts to create shares, the price of which ranges from $0 to $1 and reflects the Polymarket odds prediction of an event, if a share for one candidate is $0.75, that candidate has a 75% chance of winning. When the election is over, the price goes to $1 per share for whichever candidate wins.
Polymarket makes it easy to bet on many things. Source: Polymarket
Automated market makers, or AMMs, process transactions. Rather than finding a specific counterparty for each transaction, these sophisticated algorithms manage liquidity by automatically adjusting prices based on supply and demand, eliminating the need for traditional market makers or other centralized intermediaries.
An oracle—or third-party connection to a trusted external API specified in the smart contract–determines the winner of the bet. For example, if the bet is whether Bitcoin will be higher or lower than $100,000 by a specific date, the oracle will query a Bitcoin price API at the end date to objectively determine the winner.
Unlike most gambling markets, you can sell these shares at any time. If the Polymarket odds prediction change, you could cash out one bet and place a different bet. This increased liquidity might make these markets more predictive than conventional betting markets since traders can quickly shift the odds by adjusting their bets in real time.
The Many Applications of Crypto Betting
Prediction markets are increasingly challenging traditional forecasting methods across various fields. At the core, the success of these platforms relies on the law of large numbers. More accurate predictions are possible by incentivizing more people to voice real opinions (after all, real money is on the line).
Some of the many applications include:
Financial Markets. Traders use Polymarket polls’ accuracy to complement technical and fundamental analysis, providing an additional dimension of market sentiment.
Political Analysis. Media outlets now regularly cite election betting odds on Polymarket alongside traditional polls, recognizing their predictive value.
Corporate Decision-Making. Companies are exploring internal prediction markets to forecast project outcomes and market trends.
Of course, there are much more obscure corners of the market, too. Polymarket participants speculate on everything from the number of tweets Elon Musk will make in a week to the top AI model by the end of the year. While these may seem trivial, even the most obscure predictions could have significant implications.
Risks & Regulatory Considerations
The incoming Trump administration could open the door to less regulation in the U.S., but the industry is unlikely to become a free-for-all. Enhanced security measures and transparent reporting mechanisms could become necessary to protect consumers and meet regulatory requirements set by the CFTC and others.
Of course, even if these platforms are legally permitted, traders have ample opportunity to lose their money. For instance, celebrities could change their behaviors, or traders could pump coins based on market predictions to swing odds. And, of course, DeFi projects are vulnerable to errors in smart contracts that can lead to costly hacks.
At the same time, users should be aware of potential tax implications. If platforms like Polymarket US election betting become legal in the U.S., the IRS will likely consider any bets taxable transactions. Depending on the IRS’ decision-making process, these transactions might be considered ordinary income reported on Form W-2G or capital gains income.
What’s Next?
President-Elect Trump’s administration is set to embrace crypto. Removing regulations could reintroduce these betting markets into the U.S. and make them far more ubiquitous. In the future, this could allow election betting odds on Polymarket and other competitors to operate legally and attract a far larger share of betting volume.
Meanwhile, mainstream media increasingly appreciates the value of these predictions. The Wall Street Journal and Newsweek now report Polymarket odds predictions alongside traditional polls. The growing utility of these platforms as predictive markets could help prepare for major events and empower traders and others to profit.
The Bottom Line
The success of platforms like Polymarket suggests that prediction markets could become an integral part of future decision-making processes across industries. Their ability to aggregate collective intelligence through financial incentives offers a powerful complement to traditional forecasting methods and could generate a lot of long-term value.
Before using a crypto prediction platform, traders should familiarize themselves with the unique risk factors and the potential to owe capital gains taxes or ordinary income on any gains. That said, these platforms offer a unique way to profit from uncertain events while providing traders, politicians, and others with a wealth of knowledge.
If you buy and sell crypto assets, ZenLedger can help you stay organized for tax time. Our platform aggregates transactions across wallets and exchanges, computes your capital gains or losses, and generates the paperwork you need to file each year.
1. What makes Polymarket’s election betting odds more accurate than traditional polls?
Polymarket leverages decentralized prediction markets where users place real-money bets based on their insights. This financial incentive often leads to more accurate forecasts than traditional polls, which rely on survey data that may be biased or outdated.
2. How does Polymarket determine the winner of a bet?
Polymarket uses oracles—trusted third-party data sources—that verify outcomes from reliable sources like official election results. Once an event concludes, the smart contract automatically resolves the bet and distributes winnings accordingly.
3. Can I change my bet after placing it on Polymarket?
Yes! Unlike traditional betting platforms, Polymarket allows users to buy and sell shares at any time before an event concludes. If the Polymarket odds prediction changes, you can cash out or adjust your bet based on new developments.
4. Is betting on Polymarket legal in the U.S.?
Currently, Polymarket restricts access to U.S. users due to regulatory issues. However, with the incoming administration, some experts believe regulations could change, allowing Polymarket US election bets to be legally placed in the future.
5. Are Polymarket winnings subject to taxes?
Yes, if crypto betting becomes legal in the U.S., winnings may be subject to taxes. The IRS could classify them as either capital gains or ordinary income, depending on the circumstances. It’s important to track all transactions for tax reporting purposes.
The Rise of Polymarket & Crypto Betting
Polymarket made headlines during the 2024 election by correctly predicting President-Elect Trump’s victory over Vice President Harris. While traditional pollsters anticipated a close contest, the crypto betting platform projected a decisive Trump victory, demonstrating the potential power of decentralized prediction markets. With increasing interest in election betting odds on Polymarket, many are questioning whether such platforms are more reliable than traditional polling methods.
But what is Polymarket, and how did it make such an accurate prediction? How does the technology work under the surface? And what’s next for Polymarket’s US election predictions?
This article covers how Polymarket and other betting platforms work and why they’re poised for more growth over the coming years.
From NYU Dropout to DeFi Innovation
Shayne Coplan’s journey from NYU dropout to prediction market pioneer exemplifies the innovative spirit driving crypto adoption. In 2020, after leaving NYU’s computer science program, he raised $4 million in seed funding from Polychain Capital to build a platform that would revolutionize event prediction through financial incentives.
The platform’s early years were challenging, with only 5,700 monthly active users and less than $40 million in monthly betting volume through April 2024. A further setback came in 2022 when the CFTC fined the company $1.4 million for operating without proper registration, forcing it to restrict access for U.S. users.
Shayne Coplan built Polymarket in a bathroom office. Source: X
The 2024 election cycle marked a turning point.
After accurately predicting Biden’s withdrawal from the race, monthly betting volume surged to $500 million by September 2024. User growth exploded to 200,000 monthly active participants by November, with outstanding bets reaching half a billion dollars. This success attracted the attention of prominent figures like Elon Musk.
The accuracy of Polymarket polls’ predictions drew $70 million in Series A and B funding from notable investors, including Ethereum co-founder Vitalik Buterin and Peter Thiel’s Founders Fund, solidifying its position in the prediction market space. But interestingly, the fund doesn’t charge money to place bets, choosing growth over profitability for the time being.
That said, Polymarket isn’t the only crypto prediction market. Kalshi benefited from a ruling in October 2024 that lifted a pause on its operations and allowed users to trade election-related contracts. Polkamarkets, Hedgehog Markets, Limitless, Drift, Swaye, and Zeitgeist are also hosted on different blockchains.
The Technology Behind Predictive Markets
Decentralized prediction markets represent a clever and sophisticated application of blockchain technology to solve real-world problems.
These platforms use smart contracts to create shares, the price of which ranges from $0 to $1 and reflects the Polymarket odds prediction of an event, if a share for one candidate is $0.75, that candidate has a 75% chance of winning. When the election is over, the price goes to $1 per share for whichever candidate wins.
Polymarket makes it easy to bet on many things. Source: Polymarket
Automated market makers, or AMMs, process transactions. Rather than finding a specific counterparty for each transaction, these sophisticated algorithms manage liquidity by automatically adjusting prices based on supply and demand, eliminating the need for traditional market makers or other centralized intermediaries.
An oracle—or third-party connection to a trusted external API specified in the smart contract–determines the winner of the bet. For example, if the bet is whether Bitcoin will be higher or lower than $100,000 by a specific date, the oracle will query a Bitcoin price API at the end date to objectively determine the winner.
Unlike most gambling markets, you can sell these shares at any time. If the Polymarket odds prediction change, you could cash out one bet and place a different bet. This increased liquidity might make these markets more predictive than conventional betting markets since traders can quickly shift the odds by adjusting their bets in real time.
The Many Applications of Crypto Betting
Prediction markets are increasingly challenging traditional forecasting methods across various fields. At the core, the success of these platforms relies on the law of large numbers. More accurate predictions are possible by incentivizing more people to voice real opinions (after all, real money is on the line).
Some of the many applications include:
Of course, there are much more obscure corners of the market, too. Polymarket participants speculate on everything from the number of tweets Elon Musk will make in a week to the top AI model by the end of the year. While these may seem trivial, even the most obscure predictions could have significant implications.
Risks & Regulatory Considerations
The incoming Trump administration could open the door to less regulation in the U.S., but the industry is unlikely to become a free-for-all. Enhanced security measures and transparent reporting mechanisms could become necessary to protect consumers and meet regulatory requirements set by the CFTC and others.
Of course, even if these platforms are legally permitted, traders have ample opportunity to lose their money. For instance, celebrities could change their behaviors, or traders could pump coins based on market predictions to swing odds. And, of course, DeFi projects are vulnerable to errors in smart contracts that can lead to costly hacks.
At the same time, users should be aware of potential tax implications. If platforms like Polymarket US election betting become legal in the U.S., the IRS will likely consider any bets taxable transactions. Depending on the IRS’ decision-making process, these transactions might be considered ordinary income reported on Form W-2G or capital gains income.
What’s Next?
President-Elect Trump’s administration is set to embrace crypto. Removing regulations could reintroduce these betting markets into the U.S. and make them far more ubiquitous. In the future, this could allow election betting odds on Polymarket and other competitors to operate legally and attract a far larger share of betting volume.
Meanwhile, mainstream media increasingly appreciates the value of these predictions. The Wall Street Journal and Newsweek now report Polymarket odds predictions alongside traditional polls. The growing utility of these platforms as predictive markets could help prepare for major events and empower traders and others to profit.
The Bottom Line
The success of platforms like Polymarket suggests that prediction markets could become an integral part of future decision-making processes across industries. Their ability to aggregate collective intelligence through financial incentives offers a powerful complement to traditional forecasting methods and could generate a lot of long-term value.
Before using a crypto prediction platform, traders should familiarize themselves with the unique risk factors and the potential to owe capital gains taxes or ordinary income on any gains. That said, these platforms offer a unique way to profit from uncertain events while providing traders, politicians, and others with a wealth of knowledge.
If you buy and sell crypto assets, ZenLedger can help you stay organized for tax time. Our platform aggregates transactions across wallets and exchanges, computes your capital gains or losses, and generates the paperwork you need to file each year.
Get started today for free!
FAQs
1. What makes Polymarket’s election betting odds more accurate than traditional polls?
2. How does Polymarket determine the winner of a bet?
3. Can I change my bet after placing it on Polymarket?
4. Is betting on Polymarket legal in the U.S.?
5. Are Polymarket winnings subject to taxes?
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