Polymarket Sued by Traders Claiming $6.5M ‘Scam’ Over Bitcoin Prediction Market

Two Polymarket traders have sued the prediction market platform in New York, alleging it changed the rules governing a Bitcoin-related market after the outcome was known, costing nearly 1,900 traders a combined $6.5 million in disputed payouts.

William Wood and Thomas Bush filed suit in New York Supreme Court on Friday (July 3). As well as Polymarket and related entities, the suit names CEO Shayne Coplan and Chief Marketing Officer Matthew Modabber.

No Means Yes

Earlier this year Polymarket offered a contract on whether bitcoin treasury company Strategy, formerly known as MicroStrategy, would sell any of its Bitcoin holdings by May 31.

According to the complaint, the market promised to resolve to “Yes” if “MicroStrategy sells any of its Bitcoin by 11:59 PM ET on the date specified in the title.”

Strategy did exactly that but did not disclose the sale until a June 1 SEC filing, when it revealed it had sold 32 Bitcoin during the qualifying period.

The lawsuit says the market asked only whether the sale would occur before May 31, not whether it would be publicly announced or confirmed by that date. But after traders challenged the initial resolution, the market was ultimately settled as “No” on June 3 following a final vote by holders of UMA’s decentralized oracle token.

The plaintiffs contend Polymarket reached that outcome by posting a clarification after the fact, stating that “confirmation achieved outside of the market’s time frame does not qualify.”

The lawsuit argues the clarification fundamentally altered the contract after the event had already occurred.

“If defendants can impose a confirmation-by-deadline requirement after the fact in a market this objective, then the advertised promise of pre-defined, rules-based resolution is materially misleading,” the complaint states.

‘Markets Seek Truth’

The plaintiffs question Polymarket’s business ethos and its commitment to its own promise to resolve markets objectively according to predetermined rules.

Polymarket’s own promotional materials describe the platform as one where users can “profit from your knowledge,” where “markets seek truth,” and which promises “fair & transparent markets, by design,” states the lawsuit.

The Strategy market generated tens of millions of dollars in trading volume and became the subject of intense debate within the crypto community weeks before the lawsuit was filed. Traders were divided over whether Polymarket’s clarification reflected the original market rules or effectively rewrote them after the fact.

Wood claims he personally lost about $500,000 on the disputed market. The lawsuit seeks payment of the $1 redemption value for every “Yes” share that plaintiffs contend should have paid out, along with damages, restitution, injunctive relief, attorneys’ fees, and other costs.

Polymarket did not immediately respond to a request for comment when contacted by Casino.org.