Predictions market platform Polymarket was sued on Tuesday for allegedly manipulating the settlement criteria of a high-stakes Bitcoin prediction related to Michael Saylor’s Strategy. The lawsuit, filed by traders William Wood and Thomas Bush in the New York State Supreme Court, now seeks a jury trial in the case.
The lawsuit has accused Polymarket of retroactively chainging the terms on a bet on if Saylor’s Strategy would sell some BTC before May 31,2026. The plaintiffs have claimed that 1,868 traders who had voted for the “Yes” outcome were “scammed” by Polymarket, costing them $6.5 million.
Turn of events
On May 5, a bet went live on Polymarket asking traders — “Will Strategy sell Bitcoin before May 31, 2026?” The market reportedly attracted $80 million worth of “Yes” and “No” responses. Out of this figure, $6.5 million represented the final value of the cash sitting in the “Yes” contract pool at the exact moment the clock ran out.
On June 1, Strategy disclosed in an 8-K filing with the SEC that it did, indeed, sell 32 BTC between May 26 and May 31, 2026 — meeting the bet contract’s exact deadline on Polymarket.
Polymarket, however, settled the bet as “No” saying that the public only found out about Strategy’s BTC sale on June 1, after the bet’s deadline.
“Confirmation achieved outside of the market’s timeframe does not qualify,” said a note posted by Polymarket on the platform as it resolved the contract in favour of the “No” voters.
In the lawsuit against Polymarket, Wood claimed that he himself lost $500,000 because of the prediction market’s retroactive action. Because the market closed at 11:59 PM ET on Sunday, May 31, the official SEC 8-K wasn’t publicly released until the next morning, June 1.
“Polymarket refused to pay. The sale was the event. The SEC filing was proof of the event. Polymarket used the timing of the proof to defeat the proof of timing,” the lawsuit said.
The lawsuit also raises objections against Polymarket’s control of the platform that allows it to modify content and information at its descretion.
“If Defendants can impose a confirmation-by-deadline requirement after the fact in a market this objective, then the advertised promise of pre-defined, rules-based resolution is materially misleading. A prediction market that will not honor a proven, unambiguous event does not seek truth; it controls payout.”
Polymarket reaction to the lawsuit seeking financial compensation and corporate accountability remains awaited for now.
Is Polymarket at fault?
Polymarket does not settle bets itself.
Instead it uses a decentralized crowd-sourced jury network — UMA (Universal Market Access) — to do so. When a bet is contested, UMA token holders vote “Yes” or “No” based on the evidence to settle the bet.
In a bid to keep the jury honest, the UMA system rewards voters who side with the majority. Meanwhile, voters siding with the minority are charged a financial penalty as the UMA smart contract slashes 0.1 percent of their staked UMA tokens.
So this raises the question, who really is at fault? Polymarket or the UMA holders?
While the UMA system is designed to be a decentralized jury, whale domination has repeatedly emerged as a massive vulnerability in its voting structure.
On UMA, the voting power is directly proportional to the amount of capital a user holds. This means a handful of wealthy crypto “whales” holding millions of UMA tokens can completely control the outcome of a multi-million dollar Polymarket bet.
Because voters are terrified of losing their money by being in the minority, if UMA whales decide a market is a “No,” other voters are also forced to vote “No” just to protect their own funds from being slashed.
Polymarket, as of now, has not spoken about any plans to bring changes to how the UMA oracle affects its market settlements.
So far in 2026, the platform has already clocked over 1,000 disputed markets, media reports claim. Investigations by Bloomberg and the Wall Street Journal have also shown that many UMA voters themselves hold stakes in the contracts they participate in settling.
