Polymarket accused of moving the goalposts in $3.8 million Strategy Bitcoin sale dispute

Polymarket is under fire after traders said the platform changed how a live bet would be judged after millions of dollars had already been placed.

The market asked whether Strategy (NASDAQ: MSTR) would sell any Bitcoin by May 31. Strategy later said it had sold some Bitcoin during the week before that date. Yet Polymarket ruled that the sale did not count because the company announced it on June 1.

Hunter Guo, a 20-year-old student at King’s College London, thought he had found a simple trade. The contract was still open when Strategy published the sale. Hunter bought thousands of “Yes” shares and expected to make about $35,000. He even thought about using the money to buy a Porsche. Minutes later, the value of those shares fell to almost nothing.

Polymarket adds a late deadline and wipes out thousands of winning bets

The fight began after Strategy said on June 1 that it had sold Bitcoin during the previous week. The company’s own filing showed the sale happened before May 31. That looked like enough for traders who had backed “Yes.”

However, Polymarket later published a statement providing additional details concerning the situation. As stated, “the YES outcome of the prediction will be awarded in case of public disclosure of the trade before 11:59 p.m. ET on 31 May 2022.” As such, Strategy’s trade was filed after the stipulated date, despite the early Bitcoin trading.

This development altered the outcome for Hunter and many others. According to Polymarket figures, a sum of $3.8 million was bet on Strategy Bitcoin trade via 1,838 accounts. Their contracts lost their value after the platform applied the new wording.

“I cried for two days. It’s a lot of money,” Hunter allegedly said. He is from China and studies digital media and culture in the United Kingdom.

Hunter still believes the bet was handled unfairly. He has posted dozens of times on X under #StopPolyScam. He also sent complaints to the United States regulators and law enforcement. He used AI tools to build a website where other traders from the same market could share their losses and organize their complaints.

The controversy has shed light on the clarification process used in prediction markets. In such markets, a clarification occurs whenever new text is added in cases where an actual occurrence cannot be covered by a yes or no type of contract.

Traders use price gaps across betting platforms to lock in small profits

Prediction contracts are priced like odds. A “Yes” share at 60 cents points to a 60% chance. A “No” share at 40 cents points to 40%. The winning contract pays $1.

Polymarket and Kalshi often list the same political, economic, and crypto questions. Their prices are usually close, but not always. Those gaps can create arbitrage trades.

One example appeared in March in the market for the 2028 Democratic presidential primary. Kalshi priced Gavin Newsom at 29%, while Polymarket priced him at 24%.

A trader could buy “Yes” on Polymarket for 24 cents and “No” on Kalshi for 71 cents. The full trade would cost 95 cents. If Gavin wins, Polymarket pays $1. If he loses, Kalshi pays $1. One side must win, leaving a five-cent return before fees and other costs.

Arbitrage has long been used by quantitative traders in stocks and other markets. They buy the cheaper side and sell the more expensive side at the same time. Prediction-market users now do the same across Polymarket, Kalshi, DraftKings (NASDAQ: DKNG), and FanDuel owner Flutter Entertainment (NYSE: FLUT).

Some bettors have made thousands of dollars by acting quickly when prices split. Bigger gaps can produce bigger profits. The Strategy case also shows why contract wording matters. A trade can look certain until two platforms read the same event in different ways during final market settlement.