Peter Thiel, billionaire co-founder of PayPal and Ethereum cryptocurrency founder Vitalik Buterin, have joined forces this week to invest in predictive market exchange Polymarket to the tune of $70 million.
Said to be the world’s largest blockchain-based prediction market platform, Thiel and Buterin’s investment adds not only a vast cash windfall but also credibility. A move that flies in the face of the exchange’s looming federal oversight problems posed by the US Commodity Futures Trading Commission (CFTC) in relation to election-based wagering.
Initially created by 26-year-old founder Shayne Coplan, Polymarket is essentially a portal allowing users to place bets on real-world events using blockchain-powered “event contracts.”
First launched in 2020, with over $170 million already wagered on the 2024 US presidential election on the exchange alone, it’s already become a dominant force in the prediction market sector.
The uptick in popularity of the platform also happens to coincide with the CFTC’s push to ban election-related event contracts after it cited concerns over steering public interest, which some claim will affect the integrity of the upcoming presidential election.
Rise of Polymarket and Regulatory Challenges
Thiel, who co-founded venture capital firm Founders Fund, initially led a $45 million Series B funding round to double down on Polymarket’s potential to disrupt traditional betting markets.
This ethos appears to be supported by Thiel’s partner at Founders Fund, Joey Krug. The figure has also publicly criticized US regulations on prediction markets as overly restrictive, and framing the investment as an opportunity for the exchange platform to dominate whilst operating outside the US.
However, the danger of Polymarket operating offshore – which essentially bypasses US laws banning election betting – raises the inevitable issue of allowing external entities the chance to monetize the democratic process.
However, in a bid to rebuild its credibility with lawmakers, Polymarket appointed former CFTC chairman J. Christopher Giancarlo as an advisor in 2022, in the hope of strengthening its regulatory positioning.
This strategic and rather shrewd move highlights the platform’s attempt to bridge the gap between blockchain-based prediction market innovation and government compliance while also expanding outward into the international marketplace.
Polymarket’s High-Profile Backers
Despite the possibility of imminent federal regulation, Polymarket continues to thrive – continually opening new betting markets.
These are driven by trending topics ranging from future Bitcoin values, NFL MVP winners, and even the number of Thiel’s fellow PayPal cohort, Elon Musk’s tweets.
The platform’s integrity is also bolstered due to its use of blockchain technology, which offers full transparency by utilizing dollar-backed transactions using USDC on the exchange.
Many believe Thiel’s interest in Polymarket directly aligns with his belief that cryptocurrency is a genuine tool to challenge traditional financial systems. However, it could be argued the investment represents a technologically driven uprising against regulatory overreach in Thiel’s desire to pursue decentralized financial innovations.
On the other hand, Vitalik Buterin, while a considerably less vocal advocate than Thiel, brings a perceived legitimacy to Polymarket based on his expertise within the cryptocurrency space. So much so that, in fact, Buterin’s Ethereum blockchain underpins the platform’s technology.
As a result, Thiel and Buterin’s vested interest in the platform is ultimately based on the belief that its long-term potential seemingly outweighs the threat of any impending legal barriers it may face.
And, just like many of the other high-profile venture capitalists jumping on the Polymarket bandwagon, it is very possible they deem its current worth to be just a fraction of what it will achieve should it survive the regulatory onslaught.