Key Insights
- Suspected users were identified using public blockchain activity.
- By Sept., authorities had made 18 of the 26 cases referrals to prosecutors. 15.
- There has been no reported case law that has come to a decision on whether Polymarket contracts are covered by Article 246.
In South Korea, users of the Polymarket platform were exposed to criminal investigations for gambling because the police bookmarked 26 users by Sept. 15. Investigators connected the cases to 17.6 billion won in wagers and handed over 18 files to prosecutors.
The users who used the platform were identified by the Gangwon Provincial Police Agency based on the open-source information and public blockchain records. The investigation is part of a greater test of the applicability of South Korean law to offshore crypto prediction markets.
Police trace users through blockchain transactions
Gangwon police began preliminary inquiries in March and started booking suspects in May. Investigators examined Polymarket activity after authorities raised concerns about potential illegal gambling.
Police could not use a conventional domestic customer database because Polymarket operates through non-custodial peer-to-peer trading. Instead, investigators followed public blockchain transactions and combined wallet activity with OSINT techniques.
Police material cited by Korean media linked more than 4,000 transactions to the investigation. Reports placed the combined wagers between 17.6 billion won and more than 19 billion won.
The highest individual betting amount reached about 5.7 billion won. However, authorities have not publicly released the wallet addresses connected to the suspects.
That restriction prevents independent address-by-address verification of the reported amounts. The figures therefore remain based on police material cited by local media.
Police apply gambling provisions to Polymarket
Investigators are relying on Article 246 of South Korea’s Criminal Act. The provision allows fines of up to 10 million won for gambling.
Habitual gambling can bring imprisonment of up to three years or a fine of up to 20 million won. The law also contains an exemption for limited gambling undertaken for temporary entertainment.
Police cited a 2008 Supreme Court ruling when assessing Polymarket activity. That ruling addressed wagers involving property and outcomes that participants cannot predict with certainty.
Investigators argue that Polymarket contracts can meet those elements when users stake digital assets. Users can gain or lose their positions depending on the outcome of an uncertain event.
The suspects challenge that interpretation. Their side describes Polymarket contracts as virtual asset-based derivatives rather than conventional gambling wagers.
Attorney Kim Tae-rim of AXIS Law told Korean media that courts could examine order-book trading and early exits. Those features could distinguish prediction contracts from simple bets, although no reported court has resolved the issue.
Regulators blocked domestic Polymarket access
The investigation followed a separate regulatory action on Aug. 18. South Korea’s Korea Communications Standards Commission voted to block domestic access to Polymarket.
The commission focused on markets covering politics, economics, sports, elections and weather. It argued that users risk assets on outcomes they cannot directly control.
Regulators also examined Polymarket’s role in setting market rules and operating its settlement system. They concluded that the platform’s structure could support an illegal gambling environment for domestic users.
Polymarket challenged that view in course of the reviewing. The company did not provide korean translation services nor accept payments in korean currency.
It also highlighted its “custodial free” peer-to-peer business model. That setup, the company states, allows Polymarket “not to hold or operate customer funds.
Regulators rejected the argument that those technical features prevented South Korean law from applying. The access block therefore preceded the latest prosecutor referrals.
Crypto prediction markets face legal uncertainty
The cases highlight a wider regulatory question for blockchain-based prediction markets. Platforms can describe transactions as financial contracts, while authorities may assess the same activity under gambling laws.
South Korean police have focused on the economic risk attached to uncertain outcomes. That approach places greater weight on the transaction’s substance rather than the terminology used by the platform.
Polymarket’s international platform also differs from its US operation. QCX LLC, doing business as Polymarket US, holds a US Commodity Futures Trading Commission designated contract market registration.
That US status does not determine the South Korean investigation. Korean authorities are applying domestic criminal and regulatory rules to activity involving users in South Korea.
Conclusion
Polymarket now faces a significant legal test in South Korea after authorities moved from access restrictions toward individual prosecutions. In the 26 cases, the blockchain’s transparency can assist investigators in determining the identity of the users of the offshore platforms.
It will now be up to prosecutors and, possibly, the courts. The decisions may give more clarity to the state of crypto-funded prediction contracts under South Korean law.
