The mysterious crypto judges who settle Polymarket disputes

Garrick Wilhelm joined the crowds piling into prediction markets last month. He quickly came to regret it.

- Alexander Osipovich & Sam Kessler

More than 1,150 Polymarket bets have triggered disputes this year.

(REUTERS)

The British Columbia resident signed up for Polymarket and began wagering on events in the Middle East. One available bet was on whether Israel and Hezbollah would reach a cease-fire. Wilhelm put down $567, reasoning that the militant group would never agree to such a deal. “It seemed like a no-brainer,” he said.

When Israel reached a truce with the Lebanese government, though, some traders argued that it counted as a deal with Hezbollah. Wilhelm, reading the rules carefully, disagreed.

With millions of dollars at stake, it wasn’t Polymarket that decided who was right. Instead, Wilhelm learned that the fate of his bet was up to a loosely organized body of cryptocurrency holders empowered to arbitrate such disputes.

Disputed bets are a growing headache for prediction markets, including Polymarket, as they contend with a surge of new traders and dizzying growth in trading volume. The platforms aim to write clear yes-or-no questions for traders to wager on. But the messiness of real-world events means it isn’t always obvious which side was right.

Most prediction-market firms, such as Kalshi, sort out disputes and ambiguities themselves. But Polymarket outsources the task to a third-party service called UMA, which conducts votes when rival factions of traders disagree over who deserves a payout. The voters making such calls are holders of UMA’s digital tokens. The more tokens someone holds, the more weight their vote gets. Most voters are anonymous.

Polymarket “is not responsible for any disputes related to the resolution of any Contracts,” the platform states in its terms of use.

Many traders and crypto veterans say the UMA voting system is ripe for abuse. Nothing prevents the token holders from voting on disputed wagers in which they have a personal stake.