Lawyer Says Polymarket Trades Likely Violate Gambling Laws

Legal interpretation suggests that purchasing prediction positions in digital assets on Polymarket may meet the criteria for gambling offenses under South Korean criminal law. However, individual assessment is necessary depending on trade volume, frequency, and nature of the trading product. The Broadcasting Media Communication Commission voted to block domestic access to Polymarket on August 18, citing that its winner-takes-all profit structure based on uncontrollable events like politics, sports, elections, and weather encourages gambling tendencies.

Lawyer Jeong Seung-man stated that prediction activities on Polymarket likely meet the legal definition of gambling under criminal law. He cited the structure where users buy 'yes' or 'no' positions in digital assets based on specific event outcomes, with payouts determined by results. Article 246 of the Criminal Act defines gambling as acts involving property stakes and uncertain financial gains. The Supreme Court ruled in 2008 that even if a participant's ability affects outcomes, gambling charges may apply if chance plays any role.

Polymarket allows trading on sports, politics, cryptocurrencies, geopolitics, culture, and weather outcomes. Users buy 'yes' or 'no' positions for specific results, with payouts upon confirmation. Positions are typically purchased using digital assets like USDC, a dollar-pegged stablecoin. However, Polymarket usage itself does not automatically constitute gambling. The Criminal Act exempts minor recreational gambling. Jeong noted that transaction frequency and scale must be considered; smaller or less frequent trades may not meet the threshold.

Some products could potentially be classified as derivative contracts under securities law if traded on assets like gold, S&P 500, exchange rates, or weather—assets that can be evaluated as underlying assets. However, in a 2015 ruling, the Supreme Court did not recognize small-scale, short-term trades predicting currency fluctuations as derivatives but rather as gambling. Jeong argued that most Polymarket products lack risk hedging functions and are priced based on supply and demand, making them more likely to be classified as gambling.

Similar legal disputes continue in the U.S., including a Baltimore city lawsuit against Polymarket alleging unlicensed sports betting. South Korea's legal system will assess whether transactions meet gambling criteria based on trading structure and user behavior.