Most prediction markets, like Kalshi, resolve disputes themselves, whereas Polymarket delegates this authority to a loosely organized group of cryptocurrency holders.
Article by Alexander Osipovich and Sam Kessler, The Wall Street Journal
Compiled by Chopper, Foresight News
Last month, Garrick Wilhelm jumped into prediction market trading, but he quickly began to regret it. The resident of British Columbia, Canada, signed up on the Polymarket platform and began placing bets on events related to the Middle East, including one wager on whether Israel and Hezbollah could reach a ceasefire agreement. Wilhelm invested $567 on the outcome failing, believing the armed group would never sign a ceasefire—calling it a sure win.
Subsequently, if Israel and the Lebanese government reach a ceasefire agreement, some traders interpret this as equivalent to a truce with Hezbollah. After carefully reviewing the platform’s rules, Wilhelm firmly disagrees with this interpretation.
The outcome of this bet involving millions of dollars was not decided by the Polymarket platform. Wilhelm only then learned that the resolution of his trade was arbitrated by a loosely organized group of individuals holding cryptocurrency tokens.
As new users flood in and trading volume surges, dispute resolution has become an increasingly challenging issue for prediction market platforms like Polymarket. While the platforms aim to frame betting topics as clear, yes-or-no questions, real-world events are often complex, making outcomes difficult to definitively determine.
Like most other prediction market platforms such as Kalshi, Polymarket outsources dispute resolution to a third-party service provider, UMA. When traders disagree on the payout outcome, the UMA voting mechanism is triggered, with voting power held by UMA token holders—those with larger token holdings have greater voting weight, and the vast majority of voters remain anonymous.
Polymarket explicitly states in its user agreement that the platform assumes no responsibility for resolving disputes related to trading contracts.
Many traders and seasoned crypto industry insiders have直言 that this UMA voting system is highly susceptible to fraud. Token holders can freely vote on disputes in which they have a personal stake, with no institutional constraints.
The Wall Street Journal, combining Polymarket trading data with on-chain information, found that at least 60% of active UMA voters over the past year could be linked to Polymarket trading accounts; in all over 300 dispute cases during the same period, UMA voters held positions in the disputed betting markets.
UMA markets itself as decentralized, but on-chain data shows that voting power is highly concentrated among a few large holders. Statistics indicate that in the vast majority of dispute votes, the top ten wallet addresses account for more than half of the total votes.
Nic Carter, co-founder of venture capital firm Castle Island Ventures, bluntly stated that Polymarket should not shirk its responsibility for dispute resolution. “Resolving disputes is inherently Polymarket’s duty—it should not be outsourced to anonymous, unidentified third-party token holders.”
A spokesperson for Polymarket responded that only 0.2% of betting contracts on the platform trigger UMA voting resolutions, and noted that UMA decentralizes decision-making authority to the open market system rather than entrusting it to a single entity.
In March this year, Polymarket founder Shayne Coplan acknowledged at a Harvard Business School panel that the platform’s current dispute resolution mechanism has significant vulnerabilities. “Optimizations are imminent,” he said, without disclosing specific details of the changes. It is reported that Polymarket has entered into a data partnership with Dow Jones, the parent company of The Wall Street Journal.
UMA was co-founded by two former Goldman Sachs traders and is governed by the Risk Labs Foundation, registered in the Cayman Islands. A spokesperson for the foundation, James Fry, stated that no concrete evidence has been found indicating that the UMA platform manipulates trades. “Most of the external skepticism is simply losing traders looking for excuses.”
In the event of a dispute, UMA token holders engage in discussions on the Discord social platform, citing various supporting materials to substantiate their positions. Additionally, UMA has a penalty mechanism that imposes economic sanctions on users who vote with the minority opinion, a measure the platform claims is designed to encourage voters to make accurate, fact-based decisions.
According to Betmoar, Polymarket’s exclusive trading terminal, over 1,150 betting disputes have occurred on the platform since 2026, surpassing the total for all of 2025.
Another recent hotly debated betting market centered on streamer Clavicular’s official announcement of preparing for pregnancy: the streamer did publicly announce that their partner is pregnant, but many traders argued that this announcement did not meet the contract’s definition of a “formal valid statement.” Ultimately, UMA voting determined that this announcement was compliant. Additionally, multiple ruling discrepancies have emerged in bets related to the situation in Iran.
Public regulatory filing documents show that Polymarket initially handled all disputes internally; in early 2022, the platform reached a settlement with the U.S. Commodity Futures Trading Commission over alleged violations of U.S. financial regulations, since then delegating full responsibility for dispute resolution to UMA. This model, relying on decentralized token holder adjudication, has become a key justification for Polymarket’s claim that it operates as an offshore platform exempt from U.S. regulatory oversight.
However, Polymarket occasionally overrides UMA’s final rulings and provides additional clarifications on betting contract terms in advance to avoid potential disputes.
As previously mentioned, novice trader Wilhelm ultimately lost his bet related to the ceasefire agreement, as 87% of UMA token voters determined that the Israel-Lebanon ceasefire applied to the Hezbollah-related wager. Despite Wilhelm and other parties presenting their arguments, the ruling could not be overturned.
A group of losing traders formed a Discord community called "Whale Hunters" to collectively denounce suspected backroom dealings by top UMA voting users.
Traders have targeted the startup project UMA.rocks, a platform that enables UMA token holders to consolidate their voting power and delegate voting rights to a specialized decision committee. In recent contentious votes, UMA.rocks accounted for 8% of the total votes and is regarded by the market as a key indicator of UMA’s overall governance direction.
Lancelot Chardonnet, founder of UMA.rocks, responded: "Many traders lose money simply because they didn’t carefully read the betting rules, yet they blame UMA and our platform entirely afterward—we are the easiest target."
At the end of April, UMA.rocks officially removed Scout from the voting committee due to suspected market manipulation in their past conduct.
The journalist reached out to Scout via Discord, who denied manipulating the market or deliberately influencing incorrect voting outcomes, but openly admitted to placing bets on the Polymarket dispute while simultaneously exercising his UMA dispute resolution voting rights.
Scout believes that voting participants with a vested interest in the outcome are more likely to reach a ruling that aligns with the facts. “Voters with no stake in the matter may spend just five minutes superficially understanding the situation; as traders holding positions, we have a financial incentive to thoroughly investigate the full context and make an accurate judgment.”
He openly admitted that the industry is caught in a dilemma: “Either involve traders with conflicts of interest in decision-making, or leave voting to laypeople with no professional expertise—there is currently no perfect solution.”