Author: Deng Xiaoyu, Li Haojun
Recently, the global decentralized prediction market platform Polymarket launched a Simplified Chinese interface, sparking significant attention in the domestic market.
Does “dressing up” an overseas financial platform with a Chinese interface mean opening the door to the Chinese market? The answer is very likely yes.
In the eyes of Chinese regulators, this behavior itself sends a clear signal — the platform is intentionally targeting residents within China to conduct business, and therefore, it falls under the jurisdiction and scrutiny of Chinese law.
Polymarket, a recently popular overseas prediction platform due to its launch of a Simplified Chinese version. Users can use cryptocurrencies to “bet” on the outcomes of various events. Are these betting-like activities considered financial innovation, or are they operating in a legal gray area?
This article will analyze its business model, clarify Polymarket’s true legal classification under Chinese law based on current regulations, and clearly reveal: what legal red lines and specific risks might ordinary users and promoters face when participating?
Model Analysis: Is it “Prediction” or “Gambling”?
On the Polymarket platform, users can use USD stablecoins (such as USDC) to “bet” on the outcomes of various events. However, from a Chinese legal perspective, its business structure mainly exhibits the following three key features:
- “Either-Or” Betting Structure
Polymarket simplifies event outcomes into opposing options like “Yes” or “No,” with users buying and selling these options. Price fluctuations reflect market expectations of the event’s probability. After the event concludes, settlement is made directly in cash based on the result, with winners profiting and losers losing.
- Purely Speculative Behavior Based on “Luck”
Users’ earnings depend entirely on uncertain future events (such as election results or sports outcomes). The entire process creates no real value and does not serve as a risk hedge; essentially, it is a probabilistic speculative activity.
- Fully Cryptocurrency Settlement
All fund flows are completed via cryptocurrencies like USDC on the Polygon blockchain, completely detached from traditional banking and foreign exchange regulatory systems, and outside the scope of Chinese financial monitoring.
Legal Classification: Financial Innovation or Illegal Activity?
Although in some countries like the United States, such prediction markets may be regulated, under China’s legal framework, due to the lack of licensing and its obvious speculative nature, its legal classification is much more severe and different.
From China’s legal practice, Polymarket’s business model is very likely to be simultaneously recognized as “illegal financial activities” and “online gambling,” and it can easily become a channel for money laundering:
- Illegal Financial Activities
According to the “Notice on Further Preventing and Disposing of Virtual Currency Trading and Speculation Risks” (Yinfa [2021] No. 237) issued by the People’s Bank of China and ten other ministries in 2021:
“Overseas virtual currency exchanges providing services to residents within China via the internet also constitute illegal financial activities. For relevant overseas virtual currency exchange staff within China, and legal persons, non-legal persons, and individuals who knowingly or should have known that they are engaged in virtual currency-related business and still provide marketing, payment settlement, technical support, etc., legal responsibility will be pursued.”
As an overseas platform, Polymarket providing virtual currency-based derivatives trading to residents within China through its Chinese interface clearly falls into the scope of the above prohibitions.
- Substantially Recognized as Online Gambling
Judicial authorities adopt the principle of “substance over form.” Although the platform is called a “prediction market,” it fully meets the three elements of gambling:
- Investment funds
- Dependence on chance outcomes
- Existence of property gains or losses
Without a financial license and not serving the real economy, its nature is no different from online gambling.
- Risks of New Money Laundering Channels
Due to its anonymity and hedging mechanisms, the platform is prone to being used for “hedging money laundering”: actors can control multiple accounts to bet on opposing outcomes simultaneously, and after paying a small fee, disguise illegal funds as “betting winnings,” thus violating the crime of money laundering under the Criminal Law.
Legal Risks for Mainland Chinese Participants
Depending on the level of participation and role, mainland Chinese entities (including individuals and organizations) face significant legal risks:
- Risks for Ordinary Users: Personal Participation
For domestic individuals who access the platform solely through technical means and conduct personal transactions, the main risks are administrative penalties and fund compliance issues.
Administrative Violations:
- May face public security management penalties such as detention and fines due to participation in gambling with large stakes.
Criminal Risks:
- Since Polymarket settles in USDC and other virtual currencies, if users encounter criminal funds such as telecom fraud or gambling during deposit or withdrawal processes (OTC transactions), they may be charged with concealing or disguising criminal proceeds.
Political and Censorship Risks:
- Participating in predictions involving political figures or sensitive events may attract attention and investigation from relevant authorities.
- Promoters and Agents: High-Risk Roles
For domestic entities promoting Polymarket via social media, private groups, posting invitation links, providing trading guidance, forming call groups, or offering technical access, the legal risks are extremely high.
Gambling Crime: Developing downlines through invitation links and taking commissions is often regarded as “acting as an agent for gambling websites” in judicial practice. Serious cases can lead to imprisonment of five to ten years.
Assisting in Cybercrime: Even without direct profit, providing advertising, promotion, or technical support for platforms suspected of criminal activity can constitute the crime of assisting cybercrime, with potential imprisonment of up to three years.
Regulatory Trends and Compliance Recommendations
Currently, China maintains a strict crackdown on cross-border online gambling and illegal virtual currency transactions. The launch of a Chinese interface by Polymarket is more likely to attract regulatory focus. Based on the above risk analysis, lawyer Mankun offers the following advice for different groups:
- Practitioners and Promoters: Stay within Legal Boundaries
Please do not act as agents, promote, or support such overseas prediction platforms like Polymarket. If you are a social media KOL or community operator, it is recommended to immediately cease related promotions, cut off interests with the platform, and avoid crossing the red line of “operating a gambling casino.”
- Ordinary Users: Protect Your Funds
It is advised that individual investors fully understand the legal attributes and fund risks of cross-border online gambling, and avoid participating in such transactions to prevent bank account freezing by authorities or administrative violations that could affect personal credit and career development.
- Platforms and Related Parties: Recognize Legal Boundaries
By launching a Chinese interface, Polymarket has clearly demonstrated its intention to serve Chinese users, which makes its business subject to Chinese law. Even if the operating entity is overseas, the platform and related service providers may still face being blacklisted, service disruptions, or criminal liability. It is recommended that relevant parties carefully assess the legal consequences of涉华 (involving China) business activities.
