Polymarket is under fire after traders said the platform changed how live betting is judged after millions of dollars had already been placed.
The market wondered if Strategy (NASDAQ: MSTR) would sell any bitcoin by May 31. The strategy later said it had sold some bitcoin during the week prior to that date. However, Polymarket ruled that the sale was not taken into account because the company announced it on June 1.
Hunter Gu, a 20-year-old student at King’s College London, believes he has found a simple trade. The contract was still open when Strategy published the sale. Hunter bought thousands of “yes” shares and expected to make about $35,000. He even considered using the money to buy a Porsche. Minutes later, the value of those shares dropped to almost nothing.
Polymarket adds a late deadline and wipes out thousands of winning bets
The battle began after Strategy said on June 1 that it had sold Bitcoin during the previous week. The company’s own files showed that the sale took place before May 31. That seemed enough for traders who said yes.
However, Polymarket later published a statement providing additional details regarding the situation. As we mentioned, “The prediction score will be yes if the trade is publicly disclosed before 11:59 PM ET on May 31, 2022.” As such, Strategy trading was introduced after the specified date, despite early Bitcoin trading.
This development changed the outcome for Hunter and many others. According to Polymarket figures, $3.8 million was bet on the Bitcoin trading strategy across 1,838 accounts. Their contracts lost value after the platform implemented the new wording.
“I cried for two days. That’s a lot of money,” Hunter claimed. He said. He is from China and studies digital media and culture in the UK.
Hunter still believes the bet was handled unfairly. He has posted dozens of times on X under #StopPolyScam. He also sent complaints to US regulators and law enforcement. Use AI tools to create a website where other traders from the same market can share their losses and organize their complaints.
The controversy has shed light on the disambiguation process used in prediction markets. In such markets, clarification is made when adding new text in cases where the actual event cannot be covered by a yes or no contract type.
Traders use price gaps across betting platforms to make small profits
Forecasting contracts are priced like probabilities. A “yes” share of 60 cents indicates a 60% chance. A “no” share of 40 cents indicates 40%. The winning contract pays $1.
Polymarket and Kalshi often include the same political, economic, and crypto-related questions. Their prices are usually close, but not always. These gaps can create arbitrage trades.
One example came up in March in the market for the 2028 Democratic presidential primary. Calci priced Gavin Newsom at 29%, while Polymarket priced him at 24%.
A trader can buy Yes on Polymarket for 24 cents and No on Kalshi for 71 cents. A full trade will cost 95 cents. If Gavin wins, Polymarket pays $1. If he loses, Calci pays $1. One side must win, leaving a payout of five cents before fees and other costs.
Arbitrage has long been used by quantitative traders in stocks and other markets. They buy the cheaper side and sell the more expensive side at the same time. Prediction market users are now doing the same across Polymarket, Kalshi, DraftKings (NASDAQ: DKNG), and FanDuel owner Flutter Entertainment (NYSE: FLUT).
Some bettors have made thousands of dollars by acting quickly when the prices split. Larger gaps can produce larger profits. The strategy case also shows why contract drafting is important. A trade can appear certain until two platforms read the same event in different ways during the final market settlement.
