Is playing Polymarket considered gambling? Do Chinese players face legal risks?

Introduction

Recently, prediction markets represented by Polymarket have become very popular, and some domestic players have entered the scene. Rumor has it that some have already made money. As a Web3 lawyer, a friend asked me whether Polymarket can be played and whether there are legal risks related to gambling. Let’s analyze this through this article.

1. What are prediction markets and Polymarket?

(1) Prediction Markets

A “prediction market” can be simply understood as a platform that allows users to forecast future events that have not yet occurred, and to place bets and trade on them.

Prediction markets are not a new concept or gameplay. As early as 2014, there was a political (or policy) prediction platform called Predictit; in 2015, Augur, based on the Ethereum blockchain, was among the earliest decentralized prediction market platforms; in the same year, Gnosis, also deployed on the blockchain, was an early product of decentralized prediction markets. However, due to the immature market in the early stages, these platforms did not grow significantly and did not enter the mainstream public eye.

(2) Introduction to Polymarket

Polymarket is a prediction market platform deployed on a blockchain network (Polygon chain, a type of public chain). Users can bet on future events (such as political elections, legislative outcomes, sports matches, cultural events, etc.) by buying and selling “shares” of contracts that represent the probability of a certain outcome. The platform’s general information is as follows: it was established in 2020, headquartered in New York, USA; it is currently one of the “largest prediction markets in the world”; and it uses cryptocurrencies/stablecoins (such as USDC) for on-chain trading.

(Image source: Polymarket official website screenshot)

(3) How Polymarket operates

Let’s illustrate how Polymarket works with a simple example:

1. Choose a market (event): For example, “Will Bill X pass into law in 2026?” or “Will Haruki Murakami win the Nobel Prize in Literature?”

2. Buy and sell “shares”: In this market, you can buy shares of an option (e.g., “Yes” or “No”), with prices typically between $0 and $1, reflecting probability; the higher the price, the more the market believes that outcome is likely.

3. Buy or sell before the event result is announced: If you buy an option early and the market’s perception of its likelihood increases with new information, the price may rise, allowing you to sell for profit. Some see this as a “bet plus trade” hybrid.

4. Settlement after the event outcome is determined: If the event turns out to be true, those who bought the “Yes” shares receive corresponding returns; if false, they may incur losses. The entire process is executed transparently via smart contracts on the blockchain, eliminating the possibility of human interference.

5. Blockchain/stablecoin operation: Polymarket runs on the Polygon chain (an Ethereum Layer 2 solution), using USDC stablecoin for transactions, which facilitates global participation, transparency, and fairness.

2. Is prediction market gambling?

This is a common concern among many players, especially Chinese players. Although blockchain can be decentralized, users on the blockchain network are associated with their respective countries and thus fall under corresponding jurisdictional laws. For Chinese citizens, based on the principle of personal jurisdiction, even if a crime occurs overseas, they can still be prosecuted under domestic criminal law. Therefore, it is very important to assess whether prediction markets pose criminal risks.

(1) Gambling crimes under Chinese criminal law

According to the definition by legal scholar Professor Zhang Mingkai, “Gambling refers to the act of betting or gaming with chance-based wins or losses using property.” (“Criminal Law,” Sixth Edition, Law Press, p. 1414). “Chance-based wins or losses” means the outcome cannot be predicted or controlled by humans and depends on chance factors. In Chinese criminal law, three crimes are related to gambling: Gambling Crime, Operating Casinos, and Organizing and Participating in Overseas Gambling. In practice, the first two are most common.

Gambling crime requires profit motive, organizing gambling, or gambling as a profession; operating casinos mainly penalizes those who set up gambling venues, including providing premises, equipment, or establishing rules, organizing, or controlling gambling activities, or engaging in gambling business.

Regarding prediction markets, whether they constitute gambling under Chinese criminal law can be examined based on the criteria outlined in the “Opinions on Several Issues Concerning the Application of Law in Handling Cases of Online Gambling Crimes” issued by the Supreme People’s Court, Supreme People’s Procuratorate, and Ministry of Public Security on August 31, 2010.

(2) Does Polymarket constitute gambling under Chinese law?

For Polymarket, its mode clearly constitutes gambling under Chinese law.

First, Polymarket allows users to predict and bet on uncertain future events (buying or betting), which falls under “chance-based wins or losses” under Chinese law;

Second, users use real property (property in reality) to place bets. Virtual currencies, especially stablecoins like USDT and USDC, are recognized by Chinese judicial authorities as having property attributes in criminal cases. Therefore, even if users deposit using USDC, it is considered a “property-based gambling” activity under Chinese criminal theory;

Finally, gambling must involve both wins and losses. On Polymarket, those who bet correctly profit, and those who bet incorrectly lose, which fully meets the above criteria.

Thus, we can conclude that Polymarket’s gameplay falls under gambling according to Chinese law without issue. However, whether it constitutes a crime of gambling or operating casinos depends on the specific judicial interpretations and departmental regulations (such as the “Regulations on the Standards for Filing and Prosecution of Criminal Cases under Public Security Jurisdiction,” etc.), for example:

1. To qualify as gambling crime, one of the following must be met:

• (1) Organizing three or more people to gamble, with the total amount of betting exceeding 5,000 yuan;*

• (2) Organizing three or more people to gamble, with the total betting amount exceeding 50,000 yuan;*

• (3) Organizing three or more people to gamble, with the total number of participants exceeding 20;*

• (4) Organizing ten or more Chinese citizens to gamble abroad, and receiving kickbacks or referral fees.*

2. To qualify as operating a casino, one of the following must be met:

• (1) Establishing a gambling website and accepting bets;*

• (2) Establishing a gambling website and providing it for others to organize gambling;*

• (3) Acting as an agent for a gambling website and accepting bets;*

• (4) Participating in profit sharing from a gambling website.*

For aggravated circumstances (such as betting amounts exceeding 300,000 yuan or involving more than 120 participants), please refer to the relevant judicial interpretation, and I will not elaborate further.

For Chinese mainland users of Polymarket, special attention should be paid to the “gambling crime” criteria to avoid criminal risks. Additionally, beyond participants, promoters, operators, and payment providers within China also face corresponding criminal risks.

3. Are there other legal risks for Chinese users of prediction markets?

Statistically speaking, most people will never encounter any criminal legal risks in their lifetime. This misconception leads some to think that since others are fine, it won’t happen to them—surely the police won’t catch me. However, as a criminal lawyer, I advise everyone to avoid crossing the legal red line (criminal law). Besides criminal risks, due to the nature of Polymarket, there are other risks in China:

(1) Administrative legal risks

It is well known that in China, even if gambling does not constitute a crime, it can still face administrative penalties. Article 82 of the “Law of Administrative Penalties for Public Security” states: “Providing conditions for gambling for profit, or participating in gambling with large stakes, shall be detained for up to 5 days or fined up to 1,000 yuan; if the circumstances are serious, detention of 10 to 15 days and a fine of 1,000 to 5,000 yuan may be imposed.”

(2) Political risks

Even without gambling crimes or administrative violations, Chinese users must be cautious of another legal risk: political risks leading to illegal acts such as provocation or disturbance. Specifically, in mainland China, it is prohibited to mock political figures (except foreign politicians), and betting on political figures or political events on Polymarket is unlikely to be tolerated under Chinese law.

4. Final remarks

From an optimistic, global Web3 perspective, prediction markets like Polymarket are notable for their real-time, globalized, and decentralized (or partially decentralized) features, making them a kind of “predictive future” financial tool. However, from a conservative viewpoint, Polymarket also presents many legal, regulatory, technical, and liquidity considerations that require cautious attention and risk management.