Why Polymarket is seeking $50 million in funding?

Author: Marc Hochstein, CoinDesk; Translator: Baishui, Golden Finance

According to an article on Monday from technology news website The Information, riding on the U.S. election betting boom, Cryptocurrency prediction market platform Polymarket is seeking $50 million in new financing.

The New York-based startup is also considering issuing its own tokens, according to the article, citing unnamed sources. The Information said that if Polymarket goes ahead with the issuance plan, investors in the proposed financing round will receive warrants, giving them the right to purchase tokens.

Polymarket CEO Shayne Coplan

The article states that Polymarket will use the underlying tokens “as a way for users to verify the outcomes of real-world events.”

It’s unclear whether this will be a supplement, replacement or alternative to the UMA protocol, the “oracle” service that Polymarket uses to resolve markets and adjudicate disputes through community votes. The Information did not mention UMA, whose tokens rose slightly after the article was published.

“At its core, Polymarket is an oracle competitor,” the prediction market startup said in its filing.

Breakout year

In May, Polymarket revealed it had raised a total of $70 million in two funding rounds, one of $25 million and another of $45 million, led by billionaire Peter Thiel’s Founders Found.

The Information article did not specify whether investors in the proposed $50 million round would receive equity or just token warrants, nor did it mention Polymarket’s valuation, which has not been disclosed.

Polymarket is one of the year’s breakout success stories, both for long-under-the-radar prediction markets and for cryptocurrency itself. Bets placed through the site are programmed into smart contracts on the Polygon blockchain and settled in USDC, a token that trades 1:1 with the U.S. dollar.

Polymarket hit an all-time monthly high of $472 million in August and is on track to have at least its second-highest monthly volume this month, with $397 million in trading as of Monday, according to Dune Analytics.

Traders can use Polymarket to bet on the outcomes of everything from football games to tensions in the Middle East, but the most popular subject by far is the U.S. presidential election, on which bettors have poured nearly $1 billion.

Regulatory restrictions

Under regulatory agreements, Polymarket blocks users with U.S. IP addresses, though crafty U.S. traders have reportedly used VPNs to get around geofences.

The startup’s runaway success this year has been a sore spot for Kalshi, a regulated, dollar-denominated prediction market that has been engaged in a protracted legal battle with its regulator, the Commodity Futures Trading Commission, so that it can list contracts on which party will control both chambers of Congress. The agency has been considering a proposed rule that would ban election campaign contracts from all exchanges it regulates, which would push states to regulate such activity.

Commodity Futures Trading Commission Chairman Rothstein Benham said last week that he was looking at offshore election betting platforms that “provide exposure to U.S. customers.”

“If anyone, whether it’s Polymarket or any other company, acts in a way that violates the law, we will use our civil enforcement powers to make sure that behavior stops,” Benham said in response to questions at an event in Washington, according to Bloomberg.