Polymarket’s Market Resolution Process Called a ‘Scam’ in New Lawsuit
Credit: Department of Defense
Two Polymarket traders are suing the operator, claiming a bait-and-switch in the resolution process cost them hundreds of thousands of dollars.
According to the complaint, Polymarket made a last-minute change to contract rules after users had already invested hundreds of thousands in what the traders said should have been a winning bet under the original rules. Per the complaint, there were over $6.5 million in outstanding contracts on the side of the market that lost under the new rules.
The lawsuit revolves around a Polymarket asking traders whether Strategy (formerly MicroStrategy), a company run by famed Bitcoin bull Michael Saylor, would sell any of its Bitcoin holdings by May 31, 2026. The traders had huge positions on Yes, but Polymarket ultimately resolved the market as No.
Strategy did, in fact, sell Bitcoin before that date. However, the lawsuit claims that Polymarket subsequently changed the resolution rules to retroactively make the market resolve based on whether the sale would be publicly confirmed by May 31.
One of the plaintiffs said he lost more than $500,000 in what he called a “scam.”
Saylor’s Company Definitely Sold Bitcoin Before Target Date in Polymarket
The listed plaintiffs in the suit are William Wood and Thomas Bush. One of the traders, posting as willo_2 on Twitter, explained the lawsuit in a series of posts. He posted a screenshot that included the market resolution criteria:
“The market will resolve to ‘Yes’ if MicroStrategy sells any of its Bitcoin by 11:59 p.m. ET on the date specified in the title. Otherwise, this market will resolve to ‘No.’ The primary resolution source for this market will be information from MSTR and on-chain data, however a consensus of credible reporting will also be used.”
On June 1, Strategy revealed that it had sold 32 bitcoin between May 26 and May 31.
Contracts on the proposal were still trading on Polymarket, however. The implied probability of a sale had spiked from around 10% to north of 80% based on trading prices. Willo_2 wrote that he felt a “duty” to bet into what he called a mispriced market, and he “jammed,” betting $695,704 on Yes. At the listed price of 76 cents, such a bet would return approximately $220,000 in winnings.
“Now – the fact that people were willing to give me 20-25c on the dollar for an event that was 100% certain was certainly a red flag,” he wrote. “But I had checked and re-checked the rules. They were explicit.”
Except, according to willo_2, a new clause was added to the market after he had already made his bet.
“Confirmation achieved outside of the market’s time frame does not qualify.”
The lawsuit frames that addition as a bait-and-switch, designed specifically to mislead customers into making a bet, only to change the rules after the fact.
Lawsuit Attacks Polymarket’s ‘Truth Machine’ Marketing
The lawsuit alleges breach of contract, false advertising, unjust enrichment, and deceptive, unfair, and abusive acts, among other charges.
In addition to naming Polymarket CEO Shayne Coplan as a defendant, it also names Chief Marketing Officer Matthew Modabber.
“If Defendants can impose a confirmation-by-deadline requirement after the fact in a market this objective, then the advertised promise of a pre-defined, rules-based resolution is materially misleading,” the lawsuit states. “A prediction market that will not honor a proven, unambiguous event does not seek truth; it controls payout.”
Polymarket, like other prediction markets, frequently trumpets itself as “News 2.0,” revealing truth in real time. The plaintiffs argue they were doing exactly what Polymarket purports to reward.
The UMA Optimistic Oracle is supposed to resolve disputes on Polymarket’s rest-of-world interface. In this case, the mechanic voted almost unanimously against the suing traders, with more than 98% of the votes supporting No.
The lawsuit argues that this process is meaningless if Polymarket can add rules after the fact.
“By drafting and posting the after-the-fact ‘clarification’ in the Strategy Bitcoin Market, Defendants controlled the very input that produced the ‘No’ resolution,” it says.
Polymarket still offers the MicroStrategy sales markets. Now, however, each one is framed specifically asking whether the company will “announce selling any bitcoin by…” with dates listed thereafter. In other words, the announcement is now the operative question, rather than the possible sale itself.
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