Polymarket is a blockchain-based prediction market platform that allows users to predict future events and profit by buying and selling related contract shares. This article analyzes the risks for Chinese users from a legal perspective:

* How Polymarket Works: Users use stablecoins to bet on outcomes of future events like politics or sports, trading shares that represent the probability of a particular outcome. Settlements are executed via smart contracts once the event outcome is determined.

* Is it Gambling?: According to Chinese criminal law, Polymarket's model aligns with the definition of "gambling by staking property on an uncertain outcome," as event results are uncertain, and virtual currencies with property attributes are used for transactions involving wins and losses.

* Criminal Legal Risks: Chinese users may face charges of gambling crime or operating a gambling establishment, depending on factors like the number of people organized and the scale of gambling funds. For instance, organizing gambling for three or more people with cumulative funds reaching 50,000 RMB or more, or acting as an agent for a gambling website accepting bets, could constitute a crime.

* Other Risks: Include administrative risks under the Public Security Administration Punishment Law (e.g., detention or fines for relatively large gambling funds) and the risk of violating the crime of picking quarrels and provoking trouble due to predictions involving political figures or events.

The article advises Chinese users to participate cautiously and avoid crossing legal boundaries.

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Introduction

Prediction markets, represented by platforms like Polymarket, are currently booming. Some domestic users have already entered this space, and reportedly, some have even made profits. As a lawyer in the Web3 field, I've been asked by friends whether Polymarket is safe to use and if it carries legal risks related to gambling. This article aims to analyze these questions.

1. What are Prediction Markets and Polymarket?

(1) Prediction Markets

In simple terms, a "prediction market" is a platform that allows users to predict future events that haven't happened yet, place bets, and trade.

Prediction markets aren't a novel concept. As early as 2014, there was Predictit, a political or policy prediction platform; Augur, launched in 2015, based on the Ethereum public chain, was one of the earliest decentralized prediction market platforms; Gnosis, also deployed on the blockchain in 2015, is another decentralized platform. However, due to market immaturity and other reasons back then, these platforms didn't grow significantly and thus didn't enter the mainstream public view.

(2) Introduction to Polymarket

Polymarket is a prediction market platform deployed on a blockchain network (the Polygon chain, a type of public chain). Users can 'bet/predict' future events (such as political elections, legislative outcomes, sports events, cultural events, etc.) by buying and selling 'shares' that represent the probability of a particular outcome, reflecting the market's view on that result. Key information about the platform includes: founded in 2020, headquartered in New York, USA; currently one of the "world's largest prediction markets"; uses cryptocurrency/stablecoins (e.g., USDC) for transactions on the blockchain.

(3) How Polymarket Operates

Let's use a simple example to illustrate how Polymarket works:

1. Choose a Market (Event): For example, "Will X Bill pass into law by 2026?" or "Will Haruki Murakami win the Nobel Prize in Literature?"

2. Buy/Sell "Shares": In this market, you can buy shares of an option (e.g., "Yes" or "No"). Prices typically range between $0-$1, akin to probabilities. A higher price indicates the market believes that outcome is more likely.

3. Buy or Sell Before Outcome is Known: If you buy shares of an option early and its perceived probability increases due to new information, the price may rise, allowing you to sell for a profit. Some view this as a hybrid of "betting + trading."

4. Settlement After Event Outcome is Determined: If the event outcome is true, those who bought the "Will Happen" shares receive the corresponding payout; if false, they may incur losses. The entire process is executed transparently via smart contracts on the blockchain, eliminating the possibility of human intervention.

5. Blockchain/Stablecoin Operation: Polymarket operates on the Polygon chain (an Ethereum Layer 2 solution) and uses the USDC stablecoin for transactions, facilitating global participation, transparency, and fairness.

2. Are Prediction Markets Considered Gambling?

This is a common concern for many users, especially Chinese users. While blockchain technology itself may be decentralized, users on blockchain networks reside in specific countries and are subject to their respective jurisdictions. For Chinese citizens, based on the principle of nationality, they can be held accountable under Chinese criminal law even if they are overseas. Therefore, assessing the criminal risks of prediction markets is crucial.

(1) Gambling Crimes under Chinese Criminal Law

According to Professor Zhang Mingkai, a leading authority in Chinese criminal law jurisprudence, "Gambling refers to acts of staking property on games or contests of chance determined by uncertain outcomes" (Zhang Mingkai, Criminal Law, 6th Edition, Vol. 2, Law Press, p. 1414). "Uncertain outcomes" mean results cannot be foreseen or controlled and depend on chance. Chinese criminal law specifies three gambling-related crimes: the Crime of Gambling, the Crime of Operating a Gambling Establishment, and the Crime of Organizing or Participating in Gambling Abroad. The first two are more commonly encountered in practice.

The Crime of Gambling requires the purpose of making a profit, either by assembling a crowd for gambling or engaging in gambling as a profession. The Crime of Operating a Gambling Establishment primarily penalizes the act of running a gambling den, specifically manifested as providing venues, space, gambling tools, or setting gambling methods/rules, organizing or controlling gambling activities, and managing gambling operations.

Beyond the general analysis above, determining whether prediction markets constitute gambling crimes under Chinese law can involve examining the constitutive requirements standards outlined in the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling" jointly issued by the Supreme People's Court, Supreme People's Procuratorate, and Ministry of Public Security, effective August 31, 2010.

(2) Does Polymarket Constitute a Gambling Crime under Chinese Law?

Polymarket's model constitutes gambling under Chinese law.

* First, Polymarket allows users to place bets (buy shares or add funds) after predicting uncertain future events/activities. These uncertain events qualify as "uncertain outcomes" under Chinese law.

* Second, users use actual property for betting. Virtual currencies, especially stablecoins like USDT and USDC, are now recognized by Chinese judicial authorities in criminal cases as having property attributes. Therefore, even if users use stablecoins like USDC to add funds, it constitutes "staking property for gambling" in Chinese criminal law theory.

* Finally, gambling must involve the condition of "wins and losses." On Polymarket, those who bet correctly profit, and those who bet incorrectly lose, fully meeting this condition.

Thus, we can conclude that classifying Polymarket's玩法 (play method) as gambling under Chinese law faces no obstacle. However, assessing whether it constitutes the Crime of Gambling or the Crime of Operating a Gambling Establishment requires combining the aforementioned judicial interpretations and departmental rules, such as:

For the *Crime of Gambling**, one of the following must be met:

1. Organizing gambling for three or more people, with cumulative抽头渔利 (taking a cut of the winnings) amounting to 5,000 RMB or more;

2. Organizing gambling for three or more people, with cumulative gambling funds reaching 50,000 RMB or more;

3. Organizing gambling for three or more people, with the cumulative number of participants reaching 20 or more;

4. Organizing 10 or more Chinese citizens to gamble abroad and receiving rebates or referral fees.

For the *Crime of Operating a Gambling Establishment**, one of the following must be met:

1. Establishing a gambling website and accepting bets;

2. Establishing a gambling website and providing it to others for organizing gambling;

3. Acting as an agent for a gambling website and accepting bets;

4. Participating in the profit sharing of a gambling website.

Regarding aggravated circumstances for Operating a Gambling Establishment (e.g., cumulative gambling funds reaching 300,000 RMB or cumulative participants reaching 120 people), readers can refer to the relevant provisions of the aforementioned judicial interpretation; Attorney Liu will not elaborate further here.

Mainland Chinese users of Polymarket should pay particular attention to the constitutive standards for the Crime of Gambling mentioned first to avoid criminal risks. Additionally, besides participating players, individuals or institutions in China involved in promotion, operation, or providing payment channels also face corresponding criminal risks.

3. Are There Other Legal Risks for Chinese Users of Prediction Markets?

Statistically, most people will never face criminal legal risks in their lifetime, leading some with a侥幸 (jiǎoxìng - relying on luck) mentality to mistakenly believe that if others aren't caught, why would they be? As a criminal lawyer, I advise everyone never to touch the high-voltage line of the law (criminal law). Besides criminal risks, given Polymarket's nature, the following risks may also exist in China:

(1) Administrative Legal Risks

As is well known, in China, if gambling does not constitute a crime, it can still lead to administrative penalties under public security laws. Article 82 of the "Public Security Administration Punishment Law of the People's Republic of China" stipulates: "Whoever, for the purpose of making profits, provides conditions for gambling, or participates in gambling with relatively large amount of bet, shall be detained for not more than 5 days or be fined not more than 1,000 Yuan; if the circumstances are serious, he shall be detained for not less than 10 days but not more than 15 days, and be fined not less than 1,000 Yuan but not more than 5,000 Yuan."

(2) Political Risks

Even without the risks of gambling crimes or violating administrative laws, Chinese users need to be cautious about another legal risk: the risk of violating laws related to picking quarrels and provoking trouble due to political sensitivities. Specifically, it is prohibited in mainland China to mock or joke about political figures (domestic ones; foreign political figures are a different matter). However, using political figures or events as subjects for betting on the Polymarket platform is difficult for mainland Chinese law to tolerate.

4. Final Thoughts

From an optimistic, global Web3 perspective, the highlights of prediction markets represented by Polymarket lie in their real-time, globalized, decentralized (or partially decentralized) characteristics, making them a potential financial tool for "predicting the future." However, simultaneously, from a conservative viewpoint, Polymarket also has points requiring caution regarding law, regulation, technology, liquidity, etc., which friends must seriously consider and guard against.

Polymarket is a blockchain-based prediction market platform that allows users to predict future events and profit by buying and selling related contract shares. This article analyzes the risks for Chinese users from a legal perspective:

* How Polymarket Works: Users use stablecoins to bet on outcomes of future events like politics or sports, trading shares that represent the probability of a particular outcome. Settlements are executed via smart contracts once the event outcome is determined.

* Is it Gambling?: According to Chinese criminal law, Polymarket's model aligns with the definition of "gambling by staking property on an uncertain outcome," as event results are uncertain, and virtual currencies with property attributes are used for transactions involving wins and losses.

* Criminal Legal Risks: Chinese users may face charges of gambling crime or operating a gambling establishment, depending on factors like the number of people organized and the scale of gambling funds. For instance, organizing gambling for three or more people with cumulative funds reaching 50,000 RMB or more, or acting as an agent for a gambling website accepting bets, could constitute a crime.

* Other Risks: Include administrative risks under the Public Security Administration Punishment Law (e.g., detention or fines for relatively large gambling funds) and the risk of violating the crime of picking quarrels and provoking trouble due to predictions involving political figures or events.

The article advises Chinese users to participate cautiously and avoid crossing legal boundaries.

---

Introduction

Prediction markets, represented by platforms like Polymarket, are currently booming. Some domestic users have already entered this space, and reportedly, some have even made profits. As a lawyer in the Web3 field, I've been asked by friends whether Polymarket is safe to use and if it carries legal risks related to gambling. This article aims to analyze these questions.

1. What are Prediction Markets and Polymarket?

(1) Prediction Markets

In simple terms, a "prediction market" is a platform that allows users to predict future events that haven't happened yet, place bets, and trade.

Prediction markets aren't a novel concept. As early as 2014, there was Predictit, a political or policy prediction platform; Augur, launched in 2015, based on the Ethereum public chain, was one of the earliest decentralized prediction market platforms; Gnosis, also deployed on the blockchain in 2015, is another decentralized platform. However, due to market immaturity and other reasons back then, these platforms didn't grow significantly and thus didn't enter the mainstream public view.

(2) Introduction to Polymarket

Polymarket is a prediction market platform deployed on a blockchain network (the Polygon chain, a type of public chain). Users can 'bet/predict' future events (such as political elections, legislative outcomes, sports events, cultural events, etc.) by buying and selling 'shares' that represent the probability of a particular outcome, reflecting the market's view on that result. Key information about the platform includes: founded in 2020, headquartered in New York, USA; currently one of the "world's largest prediction markets"; uses cryptocurrency/stablecoins (e.g., USDC) for transactions on the blockchain.

(3) How Polymarket Operates

Let's use a simple example to illustrate how Polymarket works:

1. Choose a Market (Event): For example, "Will X Bill pass into law by 2026?" or "Will Haruki Murakami win the Nobel Prize in Literature?"

2. Buy/Sell "Shares": In this market, you can buy shares of an option (e.g., "Yes" or "No"). Prices typically range between $0-$1, akin to probabilities. A higher price indicates the market believes that outcome is more likely.

3. Buy or Sell Before Outcome is Known: If you buy shares of an option early and its perceived probability increases due to new information, the price may rise, allowing you to sell for a profit. Some view this as a hybrid of "betting + trading."

4. Settlement After Event Outcome is Determined: If the event outcome is true, those who bought the "Will Happen" shares receive the corresponding payout; if false, they may incur losses. The entire process is executed transparently via smart contracts on the blockchain, eliminating the possibility of human intervention.

5. Blockchain/Stablecoin Operation: Polymarket operates on the Polygon chain (an Ethereum Layer 2 solution) and uses the USDC stablecoin for transactions, facilitating global participation, transparency, and fairness.

2. Are Prediction Markets Considered Gambling?

This is a common concern for many users, especially Chinese users. While blockchain technology itself may be decentralized, users on blockchain networks reside in specific countries and are subject to their respective jurisdictions. For Chinese citizens, based on the principle of nationality, they can be held accountable under Chinese criminal law even if they are overseas. Therefore, assessing the criminal risks of prediction markets is crucial.

(1) Gambling Crimes under Chinese Criminal Law

According to Professor Zhang Mingkai, a leading authority in Chinese criminal law jurisprudence, "Gambling refers to acts of staking property on games or contests of chance determined by uncertain outcomes" (Zhang Mingkai, Criminal Law, 6th Edition, Vol. 2, Law Press, p. 1414). "Uncertain outcomes" mean results cannot be foreseen or controlled and depend on chance. Chinese criminal law specifies three gambling-related crimes: the Crime of Gambling, the Crime of Operating a Gambling Establishment, and the Crime of Organizing or Participating in Gambling Abroad. The first two are more commonly encountered in practice.

The Crime of Gambling requires the purpose of making a profit, either by assembling a crowd for gambling or engaging in gambling as a profession. The Crime of Operating a Gambling Establishment primarily penalizes the act of running a gambling den, specifically manifested as providing venues, space, gambling tools, or setting gambling methods/rules, organizing or controlling gambling activities, and managing gambling operations.

Beyond the general analysis above, determining whether prediction markets constitute gambling crimes under Chinese law can involve examining the constitutive requirements standards outlined in the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling" jointly issued by the Supreme People's Court, Supreme People's Procuratorate, and Ministry of Public Security, effective August 31, 2010.

(2) Does Polymarket Constitute a Gambling Crime under Chinese Law?

Polymarket's model constitutes gambling under Chinese law.

* First, Polymarket allows users to place bets (buy shares or add funds) after predicting uncertain future events/activities. These uncertain events qualify as "uncertain outcomes" under Chinese law.

* Second, users use actual property for betting. Virtual currencies, especially stablecoins like USDT and USDC, are now recognized by Chinese judicial authorities in criminal cases as having property attributes. Therefore, even if users use stablecoins like USDC to add funds, it constitutes "staking property for gambling" in Chinese criminal law theory.

* Finally, gambling must involve the condition of "wins and losses." On Polymarket, those who bet correctly profit, and those who bet incorrectly lose, fully meeting this condition.

Thus, we can conclude that classifying Polymarket's玩法 (play method) as gambling under Chinese law faces no obstacle. However, assessing whether it constitutes the Crime of Gambling or the Crime of Operating a Gambling Establishment requires combining the aforementioned judicial interpretations and departmental rules, such as:

For the *Crime of Gambling**, one of the following must be met:

1. Organizing gambling for three or more people, with cumulative抽头渔利 (taking a cut of the winnings) amounting to 5,000 RMB or more;

2. Organizing gambling for three or more people, with cumulative gambling funds reaching 50,000 RMB or more;

3. Organizing gambling for three or more people, with the cumulative number of participants reaching 20 or more;

4. Organizing 10 or more Chinese citizens to gamble abroad and receiving rebates or referral fees.

For the *Crime of Operating a Gambling Establishment**, one of the following must be met:

1. Establishing a gambling website and accepting bets;

2. Establishing a gambling website and providing it to others for organizing gambling;

3. Acting as an agent for a gambling website and accepting bets;

4. Participating in the profit sharing of a gambling website.

Regarding aggravated circumstances for Operating a Gambling Establishment (e.g., cumulative gambling funds reaching 300,000 RMB or cumulative participants reaching 120 people), readers can refer to the relevant provisions of the aforementioned judicial interpretation; Attorney Liu will not elaborate further here.

Mainland Chinese users of Polymarket should pay particular attention to the constitutive standards for the Crime of Gambling mentioned first to avoid criminal risks. Additionally, besides participating players, individuals or institutions in China involved in promotion, operation, or providing payment channels also face corresponding criminal risks.

3. Are There Other Legal Risks for Chinese Users of Prediction Markets?

Statistically, most people will never face criminal legal risks in their lifetime, leading some with a侥幸 (jiǎoxìng - relying on luck) mentality to mistakenly believe that if others aren't caught, why would they be? As a criminal lawyer, I advise everyone never to touch the high-voltage line of the law (criminal law). Besides criminal risks, given Polymarket's nature, the following risks may also exist in China:

(1) Administrative Legal Risks

As is well known, in China, if gambling does not constitute a crime, it can still lead to administrative penalties under public security laws. Article 82 of the "Public Security Administration Punishment Law of the People's Republic of China" stipulates: "Whoever, for the purpose of making profits, provides conditions for gambling, or participates in gambling with relatively large amount of bet, shall be detained for not more than 5 days or be fined not more than 1,000 Yuan; if the circumstances are serious, he shall be detained for not less than 10 days but not more than 15 days, and be fined not less than 1,000 Yuan but not more than 5,000 Yuan."

(2) Political Risks

Even without the risks of gambling crimes or violating administrative laws, Chinese users need to be cautious about another legal risk: the risk of violating laws related to picking quarrels and provoking trouble due to political sensitivities. Specifically, it is prohibited in mainland China to mock or joke about political figures (domestic ones; foreign political figures are a different matter). However, using political figures or events as subjects for betting on the Polymarket platform is difficult for mainland Chinese law to tolerate.

4. Final Thoughts

From an optimistic, global Web3 perspective, the highlights of prediction markets represented by Polymarket lie in their real-time, globalized, decentralized (or partially decentralized) characteristics, making them a potential financial tool for "predicting the future." However, simultaneously, from a conservative viewpoint, Polymarket also has points requiring caution regarding law, regulation, technology, liquidity, etc., which friends must seriously consider and guard against.