Polymarket’s Impact on US Election Prediction Markets

By: Eliza Bennet

Polymarket, a decentralized prediction market platform operating on the Polygon network, has gained prominence by allowing users to engage in betting on the outcomes of US political elections. This is a significant deviation from traditional US betting frameworks, where such practices are predominantly prohibited. The platform's market for the 2024 US Presidential Election has seen over $364 million wagered on potential outcomes, reflecting a growing trend of political engagement through prediction markets.

The US Commodity Futures Trading Commission (CFTC) has worked to shut down or limit platforms offering election-related contracts, highlighting the contentious regulatory landscape. Despite such challenges, Polymarket's approach has positioned it as a critical player, especially during election cycles. While officially restricted in the US, some users bypass restrictions using VPNs, although this violates the terms of use. The absence of KYC requirements further allows for broader accessibility.

Market Structure and Execution

Polymarket features binary outcome markets, where users bet on either “Yes” or “No” outcomes for various events. The platform utilizes a continuous double auction model, with prices indicating the probability of an event. For example, if “Yes” shares for an event are trading at $0.56, it reflects a 56% probability of that outcome occurring. To participate, users connect their EVM-compatible wallets like MetaMask and deposit USDC into their Polymarket accounts.

A good example is the 2024 US Presidential Election, where, as of recent, Donald Trump holds a 61% chance of winning with shares traded at $0.61. Users purchase “Yes” shares if they believe Trump will win or “No” shares if they think he will lose. This allows for strategic trading based on fluctuating probabilities before market resolution.

Technical Infrastructure & Reward Mechanism

The platform uses Polygon for scalability and lowered transaction costs. Developers can access REST and WebSocket API endpoints for market data, pricing, and order history, which facilitates the creation of third-party tools. Additionally, Polymarket employs the UMA (Universal Market Access) Optimistic Oracle for market resolution to ensure fair and transparent outcomes.

Polymarket's reward mechanisms encourage liquidity and participation with liquidity provider rewards and order scoring functions, which are calculated based on market participation, depth, and spreads. Weekly rewards are distributed directly to users’ addresses, with additional incentives available through specialized competitions.

Features and Advantages

Polymarket offers several unique advantages such as real-time trading, no native token requirement, self-custodial wallets, a wide array of markets, efficient scalability, and transparent price discovery. It merges blockchain technology, sidechain scaling, decentralized oracles, and reward mechanisms to create a robust prediction market platform.

These features ensure real-time trading, fair market resolutions, and incentivized participation, making Polymarket a notable entity in the prediction market space. For more details, you can visit Polymarket.