Polymarket Reportedly Eying $50M Fundraise and Token Launch

Polymarket, the largest web3 prediction market platform, is reportedly seeking $50 million in fresh funding to finance operations.

According to a Sept. 23 report from The Information, investors backing the round would also receive token warrants, granting them the right to purchase tokens if Polymarket proceeds with the issuance.

"The prediction site could use the tokens as a way for users to validate the outcome of real-world events,” The Information said, citing anonymous sources.

Polymarket currently leverages UMA’s Optimistic Oracle (OO), a system used to resolve disputes and validate real-world outcomes. Contracts on Polymarket can request data from the OO, which supplies an outcome. However, if this result is disputed, the case escalates to UMA’s Data Verification Mechanism (DVM), through which UMA tokenholders vote on the correct outcome.

Should Polymarket proceed with its token launch, the new token could integrate into this process, potentially supplementing or replacing its reliance on UMA by bringing dispute resolution in-house.

As of publication, Polymarket did not respond to The Defiant’s request to comment.

Polymarket already raised $70 million across two funding rounds this year. In May, the company announced it had closed a $45 million Series B featuring participation from Ethereum co-founder, Vitalik Buterin, following a previously undisclosed $25 million in a Series A round led by General Catalyst.

Polymarket allows users to wager on the outcomes of real-world events using cryptocurrency, with predictions secured by smart contracts on the Polygon blockchain.

Disagreements with UMA

Polymarket’s reported plan to introduce a token comes against the backdrop of an increasing number of disputes between Polymarket and UMA's event resolution mechanisms.

In June, tensions between Polymarket and UMA erupted when a prediction market regarding Barron Trump’s alleged involvement in the creation of a meme coin called DJT stirred controversy.

Initially, UMA’s oracle system resolved the market in favor of the "no" side, but Polymarket later overruled this decision, asserting that Barron Trump was involved "in some way." Polymarket said it would refund holders of the "yes" contract, despite UMA’s majority vote favoring the opposite outcome.

According to the market’s terms, UMA token holders voted multiple times, rejecting the claim that Barron Trump had any involvement with the DJT token. However, Polymarket stepped in, indicating the platform believed the oracle got it wrong.

A similar incident occurred in May when Polymarket bettors challenged UMA’s resolution regarding spot Ethereum exchange-traded fund (ETF), which UMA found to have been approved despite the funds remaining under review by the SEC.

U.S. election wagering surges

The news comes as the platform is enjoying a surge in activity amid a frenzy of betting on the 2024 U.S. presidential election.

As of September, Polymarket users have placed $993.1 millionworth of bets on who will win the presidency, alongside $223.6 million on the popular vote market.

The platform has posted new all-time highs for trade volume and users for the past four consecutive months. In August, the platform hosted $472.9 worth of predictions from 63,616, marking year-over-year volume and user increases of 5,900% and 2,985% according to Dune data compiled by Richard Chen.

Polymarket’s momentum has continued to grow throughout September, with the platform posting record daily volume of $37.3 million on Sept. 11 and hosting an all-time high of 12,649 daily users on Sept. 18. Over the past seven days, election markets accounted for 86% of volume and 74% of users.

Regulatory scrutiny

However, Polymarket’s success is also drawing increased scrutiny from U.S. regulators.

On Sept.18, Rostin Behnam, chairman of the U.S. Commodity Futures Trading Commission (CFTC), raised concerns about Polymarket potentially offering services to U.S. residents without proper registration.

“If anyone, Polymarket or otherwise, conducts themselves in a way that breaks the law, we will use our civil enforcement authority to make sure that conduct stops,” Behnam said.

In January 2022, the platform settled with the CFTC for $1.4 million after allegedly offering more than 900 event-based binary options markets without the required registrations. Following the settlement, Polymarket restricted access for users with U.S. IP addresses, though reports indicate that some American traders continue to bypass these restrictions by using VPNs to place bets.