Polymarket users referred to prosecutors in South Korea: Report
South Korean police have referred 18 Polymarket users to prosecutors in an illegal gambling probe involving 26 individuals and approximately $12.7 million in wagers.
Intelligence analysis by Gemini 2.5 Flash
Authorities in South Korea are investigating 26 individuals for alleged illegal gambling on the prediction market platform Polymarket, with 18 already referred to prosecutors. The probe, initiated by the Gangwon Provincial Police Agency, centers on the argument that Polymarket transactions constitute illegal gambling under South Korean law, despite users' claims of it being a crypto-b…
Imagine a game where you bet on whether something will happen, like if it will rain tomorrow. South Korea says that a website called Polymarket, where people bet on future events using digital money, is like an illegal betting game. So, they've sent some people who used it to the grown-up police, saying they were gambling instead of just investing their digital coins.
Analysis
The recent referral of 18 Polymarket users to prosecutors in South Korea marks a significant escalation in the country's efforts to regulate decentralized prediction markets. The investigation, which has placed 26 individuals under scrutiny for wagering a collective 17.6 billion won (approximately $12.7 million), underscores the legal complexities arising from the intersection of blockchain technology and traditional gambling laws. Authorities identified users by analyzing publicly available blockchain transactions, a method that bypasses Polymarket's noncustodial, peer-to-peer structure which does not maintain a conventional list of users by their real names. This approach demonstrates regulators' growing sophistication in tracing on-chain activity, even on platforms designed for anonymity.
Gangwon Provincial Police Agency
The Gangwon Provincial Police Agency initiated South Korea's first illegal gambling probe into local Polymarket users in June, following a request from the National Police Agency. This action culminated in the referral of 18 individuals to prosecutors, with one user reportedly wagering as much as 5.7 billion won ($4.1 million). The police's stance is that Polymarket transactions fall under illegal gambling as per South Korea’s Criminal Act, primarily because users stake assets on outcomes that are inherently uncertain. This interpretation directly challenges the platform's operational model and the users' perception of it as a legitimate investment vehicle.
Polymarket's Defense
Polymarket has countered these allegations by asserting that it does not offer Korean-language services or support payments in Korean won, aiming to distance itself from direct engagement with the South Korean market. Furthermore, the platform emphasizes its noncustodial transaction model and the use of smart contracts, arguing that these technical characteristics mean it does not directly manage user funds. However, the country’s media and communications review commission rejected these arguments, stating that technical features do not exempt a service from South Korean law. The commission specifically cited Polymarket’s winner-takes-all structure and its role in operating markets, setting trading rules, providing crypto deposits, withdrawals, settlement, and collecting transaction fees as evidence of an illegal gambling environment.
Tae-Lim Kim's Legal Perspective
Tae-Lim Kim, a managing attorney at AXIS Law, provided a legal perspective, suggesting that Polymarket transactions could indeed meet the legal requirements for gambling in South Korea. He noted that while users might argue these are prediction derivatives, using this as a direct defense in criminal proceedings would be challenging. However, Kim also highlighted that the ability to trade contracts and exit positions before settlement could be a relevant factor for a court's assessment. This nuance suggests that the legal outcome might hinge on how courts interpret the liquidity and tradability aspects of prediction market contracts, distinguishing them from traditional fixed-odds gambling.
Key points
- South Korean police referred 18 Polymarket users to prosecutors in an illegal gambling probe.
- The investigation involves 26 individuals who collectively wagered approximately $12.7 million (17.6 billion won).
- Authorities identified users by analyzing publicly available blockchain transactions.
- South Korean authorities argue Polymarket transactions constitute illegal gambling under the Criminal Act.
- Polymarket's arguments regarding non-Korean services and noncustodial structure were rejected by regulators.
The ongoing legal action in South Korea poses a significant risk to Polymarket users, potentially leading to criminal charges and financial penalties. For the platform itself, the ruling could set a precedent that restricts its operations or access in other jurisdictions, hindering its growth and adoption in key markets.
