Polymarket suffered a governance attack, forcing a fake market settlement

Polymarket faced a flawed resolution for one of its prediction pairs. The governance attack affected a relatively small market, but showed that a user could force the oracle’s resolution without real consensus. 

Polymarket has suffered a governance attack on a relatively minor prediction pair. Despite this, the situation is unprecedented as a prediction pair resolved without the community’s consensus. 

Polymarket admitted a $7M gain on a bet was made possible through a flawed oracle. The platform is in talks with the UMA oracle team, to assure a similar situation does not arise again. 

Prediction pair resolved after loaded vote

The Ukraine Rare Earth Metals market resolved to 100%, with doubts on the outcome’s accuracy. The prediction pair had to estimate whether Ukraine would agree to a rare earth metals deal with the USA before April. However, Polymarket’s result simply does not correspond to reality, as a rare earth metals deal is still far off, with no clear signed agreement. 

A Reuters report shows the issue is still undecided, with a signed agreement coming soon, but with no strict deadline. There are additional talks of changes in the deal conditions. The Polymarket community does not consider the recent news as sufficient evidence to resolve the market to ‘Yes’.

A ‘Yes’ outcome was proposed twice for the market and disputed. The participants expected a negative outcome, as even the date of the resolution was set to March 31, and there were no real signs of a deal. Despite this, one of the whales participating was able to force a resolution. 

The conflict also arises from the prediction pair itself. On Polymarket, the pair conditions explicitly state: “The resolution source for this market will be official information from the governments of the US and Ukraine.” There is no official document or announcement at this stage, only oral statements from Donald Trump and preliminary announcements.

Despite this, at the last moment, Polymarket announced the vote would be decided by the UMA oracle and subjected to a vote, instead of waiting for the official statement.

The recent disputes tarnish the resolution of Polymarket as an accurate predictor of political events. For some disputed markets with low volumes, it is entirely possible to have a manipulated vote and fake outcomes.

Polymarket was forced to resolve the pair by whale holder 

The reason for the market’s resolution lies in the UMA oracle, a service that Polymarket uses for some of its pairs. 

A whale spent 5M UMA tokens, gaining a higher weight on the final vote. The UMA oracle relied on a vote-based consensus and rational behavior, expecting that no malicious votes would be added. However, the whale managed to add 25% to the ‘Yes’ vote, in the end resolving the market to 100%. 

“The fraudsters used this to coordinate the vote result and alter it in their favor. At the time of voting, the ‘P4 – Too Early’ option had the majority, but when it came down to the final battle, it became clear that someone sent millions of UMA tokens to the ‘Yes’ side,” wrote user u/iamzheone in a lengthy Reddit post explaining the potential market manipulation.

Just before the market resolved, the price of the ‘Yes’ token was just $0.09, giving all buyers an advantage. However, ‘No’ buyers were more numerous and with bigger bets. The top negative voters had the deepest losses on their position, which would probably have resolved to ‘No’. 

Currently, the Polymarket community is expressing anger about the situation, adding speculations that UMA voter whales and Polymarket participants may be colluding to produce the desired outcome. The vote on this particular issue required only 10M votes, which could easily be swayed by large holders of UMA tokens. 

The recent UMA debacle reveals that even decentralized consensus oracles are not dispassionate arbiters, but allow for insider actions. Additionally, the one specific betting pair that resolved followed two similar markets that resolved to ‘No’, once again raising doubts about the oracle’s honesty and the influence of whale traders. The pair was also the most liquid one, with over $7M in bets, while other similar markets had volumes under $100K.

The Polymarket community has called for abandoning the market until unfair resolutions are resolved. Currently, Polymarket draws in over 46K daily active traders, with relatively small bets. The market achieves over $687M in monthly volumes, though most of the activity is concentrated to large-scale pairs.

Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot