Two traders from Polymarket have initiated legal action against the prediction market platform in New York, claiming it altered the rules of a Bitcoin-related market after the outcome had been determined, thereby costing nearly 1,900 traders a total of $6.5 million in contested payouts.
On July 3, William Wood and Thomas Bush filed their lawsuit in the New York Supreme Court. The suit names not only Polymarket and its affiliates but also CEO Shayne Coplan and Chief Marketing Officer Matthew Modabber.
Changing the Narrative
Earlier this year, Polymarket introduced a contract regarding whether the treasury company Strategy, formerly called MicroStrategy, would liquidate any of its Bitcoin assets by May 31.
The complaint states that the market was supposed to resolve as “Yes” if “MicroStrategy sells any of its Bitcoin by 11:59 PM ET on the specified date.”
Indeed, Strategy sold Bitcoin but made the announcement only via an SEC filing on June 1, revealing a sale of 32 Bitcoin within the relevant time frame.
According to the lawsuit, the market only inquired whether the sale would happen before May 31, without any stipulation about public confirmation by that time. However, following disputes from traders, the market was ultimately resolved as “No” on June 3 after a final vote by UMA’s decentralized oracle token holders.
The plaintiffs argue that Polymarket reached this outcome by issuing a retroactive clarification, stating that “confirmation achieved outside of the market’s time frame does not qualify.”
The lawsuit claims this clarification essentially modified the contract post-event.
“If the defendants can enforce a confirmation-by-deadline stipulation retroactively in such an objective market, then the claimed promise of a predefined, rules-based resolution is fundamentally misleading,” the complaint asserts.
Questioning Business Ethics
The plaintiffs challenge Polymarket’s ethical practices and its adherence to the commitment of resolving markets impartially according to set rules.
Polymarket’s own promotional content suggests that users can “profit from your knowledge,” asserting that “markets seek truth” and vowing “fair & transparent markets, by design,” as highlighted in the lawsuit.
The Strategy market amassed tens of millions of dollars in trading volume, creating significant discussion within the crypto community weeks before the lawsuit was filed. Traders were split over whether Polymarket’s clarification adhered to the original market rules or effectively altered them retroactively.
Wood asserts he personally incurred a loss of approximately $500,000 on this contentious market. The lawsuit demands the redemption value of $1 for every “Yes” share that the plaintiffs believe should have been paid out, in addition to damages, restitution, injunctive relief, legal fees, and other expenses.
Polymarket had not provided an immediate response to a request for comments from Casino.org.