Cryptocurrency-based prediction market Polymarket is tightening its user verification processes following a surge in bets backing Donald Trump in the upcoming U.S. presidential election.
The platform is scrutinizing users who have placed large wagers to confirm they are based outside the U.S., as U.S. residents are prohibited from accessing the platform, Bloomberg reported, citing a source familiar with the company’s internal operations.
The recent spike in attention to Polymarket’s U.S. political markets is tied to a small group of accounts that have collectively bet millions of dollars on Trump’s chances of returning to the White House.
One notable account, identified as “Fredi9999,” has wagered over $18 million on Republican outcomes, with nearly $13 million focused on the platform’s primary presidential market. This makes Fredi9999 the largest and most profitable bettor in Polymarket’s history.
Betting on the U.S. presidential election has always been one of Polymarket’s top attractions. To date, the platform has seen over $2.2 billion in trading volume on its primary election market.
As we explore, this incident highlights the struggles Polymarket faces.
At it’s best, Polymarket can be a great use of crowsourced polling (“put your money where your mouth is”). But as people increasingly pay attention to Polymarket’s predictions, manipulation by ‘whales’ becomes a bigger concern.
Trump’s Sharp Lead Sparks Manipulation Concerns
As of October 23, Polymarket shows a 64.2% chance of a Trump victory, higher than predictions on rival platforms such as PredictIt, where Trump’s odds stood at 59%, and Kalshi, which placed the likelihood at 60%.
This disparity is especially stark when compared to actual voter polls. According to the RealClearPolitics polling average, Trump is trailing Democratic opponent, Vice President Kamala Harris, by a narrow margin of 49.3% to 48.5%.
Nevertheless, the unprecedented surge in Trump bets has prompted allegations of market manipulation. The Wall Street Journal recently reported that just four accounts, including Fredi9999, have been responsible for spending around $30 million on Trump-related bets.
Miguel Morel, CEO of Arkham Intelligence, told the WSJ there is “strong reason to believe” that these accounts are operated by the same entity. The accounts in question — Fredi9999, Theo4, PrincessCaro, and Michie — were all created between June and October and share several commonalities.
They were funded through the same cryptocurrency exchange and exhibit similar betting patterns, further fueling speculation that the activity could be an attempt at market manipulation.
Blockchain sleuths on social media, under the usernames FozzyDiablo and Domahhhh, and backed by research firm Arkham Intelligence, have suggested that Fredi9999 and three other accounts might be controlled by the same individual.
Together, these accounts have reportedly wagered more than $43 million on Republican outcomes. Despite this heavy betting, the accounts are all based outside the U.S., the insider told Bloomberg.
A long-winded and winding update on Fredi9999 — the person or entity — who is singlehandedly rocketing up the price of Trump on prediction markets around the world.
Spoiler alert: I managed to make contact with him, I think, and he blocked me after a few minutes. Sensitive… pic.twitter.com/HYlZpUfk2k
— Domer (@Domahhhh) October 16, 2024
Manipulation or Strategic Betting?
Despite rising concerns about potential manipulation, some experts suggest that the recent surge in Trump bets on Polymarket could be more than just an attempt to influence market odds.
Rajiv Sethi, an economist who previously studied market manipulation in the 2012 presidential election, told the WSJ that if someone were trying to manipulate the market, they would likely do so in the same way as seen on Polymarket.
Others have speculated that the large wagers could be part of a strategic hedge by individuals who stand to gain financially from a Trump victory.
Adam Cochran, a crypto investor, theorized that the betting surge might be designed to bolster Trump’s narrative of strength, making potential claims of a “stolen” election more believable if he were to lose to Harris.
Political strategist Tom Bonier offered a similar analysis, suggesting the Trump bets might be part of a coordinated effort to shape public perception in the final stretch of the election.
“Donald Trump’s persona relies on being seen as strong,” Bonier said. “If the public believes he will lose, that image crumbles.”
Polymarket’s Legal Troubles
Polymarket’s efforts to block U.S. users from participating in its markets stem from legal challenges it has faced in the past.
In early 2022, the Commodity Futures Trading Commission (CFTC) fined the platform for offering illegal trading services in the U.S. As part of the settlement, Polymarket agreed to wind down its U.S. operations while continuing to offer services internationally.
Despite these measures, some U.S. traders have reportedly found ways to circumvent the platform’s restrictions by using virtual private networks (VPNs).
Social media platforms are rife with tutorials on how to bypass Polymarket’s geoblocking measures. This has allowed some American traders to access the platform and place bets on the U.S. election despite the official ban.
Meanwhile, Polymarket faces competition from other prediction markets. Rival platform Kalshi, for instance, recently won a legal battle against the CFTC, allowing it to offer local derivatives contracts tied to the outcome of the U.S. presidential election.
The Bottom Line
The sharp rise in Trump’s winning odds on Polymarket has sparked concerns about potential manipulation. The platform has also scrutinized its largest wagers to ensure they are not based in the U.S.
Polymarket is a fascinating (and for some, profitable) new way of betting on current and global affairs. But can the business tread the line between people making gambles, and wealthy participants manipulating the market and public sentiment? Place your bets.