Recently,the global decentralized prediction market platform Polymarket launched a Simplified Chinese interface, which has attracted significant attention in the domestic market.
Does a foreign financial platform "putting on" a Chinese-language interface amount to opening its doors to the Chinese market? The answer is very likely yes.
In the eyes of Chinese regulators, this conduct itself sends a clear signal—the platform intends to target residents within China to conduct business, and will therefore be placed under the jurisdiction and scrutiny of Chinese law.
Polymarket, a foreign prediction platform that recently drew attention by launching a Simplified Chinese version. Users can use crypto assets to "bet" on the outcomes of various events. This type of business, which has the nature ofbetting against the house, is it financial innovation, or does it operate in a legal gray area?
This article will look through its business model and, based on currently effective domestic laws and regulations, clarify for you Polymarket's true characterization under Chinese law, and clearly reveal: whether you are an ordinary user or a promoter, what legal red lines and specific risks might you face by participating?
Model analysis: called "prediction," but actually "betting against the house"?
On the Polymarket platform, users may use U.S. dollar stablecoins (such as USDC) to place bets on the outcomes of various events“place bets”However, viewed from the perspective of PRC law, its business structure primarily exhibits the following three key characteristics:
1. An “either-or” wagering structure
The Polymarket platform designs event outcomes simply as “yes or no” and similaropposing options, and users buy and sell these options, with price fluctuations reflecting the market's expectations regarding the probability of the event occurring. After the event concludes, cash settlement is made directly according to the outcome, with winners profiting and losers suffering losses.
2. Speculative conduct in which outcomes depend entirely on “luck”
Users' returns depend entirely onfuture uncertain events(such as election results or the outcome of sporting events); the entire process creates no actual value and does not perform a risk-hedging function, and in essence it is a form ofprobability-based speculative conduct。
3. Full cryptocurrency settlement throughout
All fund flows arethrough cryptocurrencies such as USDCcompleted on the Polygon blockchain, entirely outside the traditional banking and foreign exchange regulatory systems, and beyond the sight of Chinese financial monitoring.
Legal characterization: financial innovation or illegal activity?
Although in some countries, such as the United States, such prediction markets may be brought within the scope of regulation,under the legal framework of mainland China, because they lack a licensed market-access basis and carry obvious speculative attributes, their legal characterization is entirely different and more severe.
From the perspective of Chinese legal practice, Polymarket's business model is highly likely to be simultaneously characterized as "illegal financial activity" and "online gambling," and is highly susceptible to becoming a money-laundering channel:
1. Characterization as illegal financial activity
According to the Notice on Further Preventing and Handling the Risks of Speculation in Virtual Currency Trading (Yin Fa [2021] No. 237) issued in 2021 by the People's Bank of China and ten other ministries and commissions:
"Overseas virtual currency exchanges providing services to residents within China through the internet also constitute illegal financial activity. For domestic staff of the relevant overseas virtual currency exchanges, as well as legal persons, unincorporated organizations and natural persons that, while knowing or ought to know that they are engaged in virtual currency-related business, still provide them with services such as marketing and publicity, payment and settlement, and technical support, relevant liability shall be pursued in accordance with law."
As an overseas platform, if Polymarket provides virtual-currency-based derivatives trading to domestic residents through a Chinese-language interface, it clearly falls within the scope of the above prohibitory provisions.
2. Substantively Determined as Online Gambling
Judicial authorities apply the determination principle that "substance prevails over form." Although the platform is named a "prediction market," it fully satisfies the three elements of gambling:
- contribution of funds
- reliance on chance outcomes
- existence of financial gain or loss
In the absence of a financial license and without serving the real economy, its nature is no different from online gambling.
3. Risk of a New Type of Money Laundering Channel
Due to its anonymity and hedging mechanisms, the platform is readily used for "hedging money laundering": an actor may control multiple accounts to simultaneously place bets on opposing outcomes and, after paying a small fee, disguise illegal funds as "prediction proceeds," thereby violating the money laundering offense under the Criminal Law.
Analysis of Legal Risks for Participating Entities in Mainland China
Depending on the degree and role of participation, the legal risks faced by mainland Chinese entities (including natural persons and institutions) differ significantly.
1. Ordinary Users: Risks of Individual Participation
For domestic natural persons who access the platform only through technical means and conduct personal transactions, the primary risks are administrative penalty risk and fund compliance risk.
- Administrative liability for violations:
A person may be subject to public security administrative penalties, including detention and fines, for participating in gambling where the amount wagered is relatively large.
- Criminal risk:
Because Polymarket uses virtual currencies such as USDC for settlement, if a user comes into contact with criminal proceeds from telecom fraud, gambling or other crimes during deposits and withdrawals (OTC transactions), the user may be found to have committed the crime of concealing or disguising criminal proceeds.
- Political and censorship risk:
Participating in predictions concerning political figures or sensitive events may draw the attention and investigation of the relevant authorities.
2. Promoters and agents: high-risk roles
Domestic entities that use social media or private community groups to promote Polymarket, publish invitation links, provide trading guidance, form call-signal groups or provide technical access services face extremely high criminal legal risk.
Crime of operating a gambling establishment: if a person develops downline members through invitation links and takes a cut therefrom, judicial practice often characterizes this as "acting as an agent for a gambling website." Where the circumstances are serious, the person may be sentenced to fixed-term imprisonment of not less than five years but not more than ten years.
Crime of assisting information network criminal activities: even without direct profit, a person who knows the platform is suspected of criminal activity and still provides assistance such as advertising, promotion or technical support may also commit this crime and face fixed-term imprisonment of not more than three years.
Regulatory trends and compliance recommendations
China currently maintains a strict crackdown on cross-border online gambling and illegal virtual currency transactions. Polymarket's launch of a Simplified Chinese interface is particularly likely to draw the focused attention of regulators. Based on the above risk analysis, Mankun Law Firm offers the following recommendations for different groups:
1. Practitioners and promoters: hold the legal bottom line
Please do not act for overseasOverseasprediction platforms such as Polymarket asan agent, promote them, or provide any supportIf you are a self-media KOL or community operator, it is advisable to immediately stop the relevant promotion, cut off any interest-based connection with the platform, and avoid crossing the red line of the crime of opening a casino.
2. Ordinary users: protect your wallets
Individual investors are advised to fully understandcross-border online gamblingand its legal character and fund risks, and to avoid having their bank accounts judicially frozen by public security authorities as a result of participating in such transactions, or incurring administrative violation records that affect their personal credit and career development.
3. Platforms and related parties: recognize the legal boundaries
By measures such as launching a Chinese-language interface, Polymarket has already shown a clear intent to serve Chinese users, which in effect subjects its business to the jurisdiction of Chinese law.Even if the operating entity is located outside China, the platform and its related service providers may still face the risk of being blacklisted, having their services blocked, or even bearing criminal liability. Relevant parties are advised to carefully assess the legal consequences of business operations involving China.
Conclusion
Financial innovation should be carried out within the framework permitted by laws and regulations. As an emerging economic model, prediction markets currently lack a lawful access pathway within China. For entities within China, participating in such activities not only lacks legal protection but also exposes them to serious administrative and even criminal liability. All market participants are advised to remain rational and strictly observe the bottom line of compliance.
Authors of this Article
Deng Xiaoyu，Partner at Mankun (Shenzhen) Law Firm. Mr. Deng specializes in criminal cases and has participated in handling nearly three hundred cases, with solid theoretical grounding and extensive practical experience. He is particularly adept in the field of Web3.0 crime and has provided criminal defense for several well-known digital currency exchanges, effectively safeguarding the rights and interests of his clients. He has received the "Special Contribution Award for the 30th Anniversary of the Shenzhen Lawyers Association" and has been interviewed by several well-known domestic media outlets and invited by the industry to give lectures on multiple occasions.
Li Haojun, practicing lawyer at Mankun (Shenzhen) Law Firm. Bachelor of Laws, Beijing Normal University (Zhuhai). Lawyer Li Haojun has been deeply involved in multiple difficult and complex litigation cases, possesses a solid professional foundation and a high degree of dedication, and is committed to providing clients with solutions to complex and difficult issues. His goal is to become a dispute resolution lawyer who "understands both the profession and the industry," and he currently focuses on criminal, civil and commercial cases in new economy fields such as Web3, blockchain, and cryptocurrencies.
About Mankun
Mankun Law Firm was established in 2015 and is a boutique law firm in China focused on the Web3.0 new economy and deeply engaged in the blockchain industry. Members of the Mankun team possess diverse and distinctive industry backgrounds, coming from well-known legal service institutions, state judicial organs, internet technology companies, crypto assets institutions, blockchain industry think tanks, and other organizations.
Based on a profound understanding of the new economy, continuous attention to and research on policies and regulations, and extensive practical experience, the Mankun team is adept at providing comprehensive legal services to new economy enterprises in fields such as Web3.0, blockchain, AI, NFTs, digital collectibles, crypto funds, crypto payments, DeFi, real-world assets (RWA), and GameFi from the perspectives of business models and legal practice, including commercial architecture design, project investment and financing, transaction planning, business compliance, resolution of complex civil and commercial disputes, criminal risk prevention and risk management, and criminal defense.
Mankun Law Firm is headquartered in Shanghai and has branches in Hong Kong, China, Silicon Valley in the United States, Shenzhen, Hangzhou, Zhengzhou, Chengdu, and other locations. In response to the global compliance development needs of Web3.0 industry clients, Mankun has established local offices in major global crypto finance cities and selected local professional blockchain service partners to provide clients with professional legal and compliance services with global breadth and China depth.
