Polymarket is reportedly eyeing a $50 million funding round to finance its operations and support its upcoming token launch. Per the official statement, investors who partake in the fundraiser are eligible to receive token warrants allowing them to purchase the assets should Polymarket debut its native coin.

Leveraging the Polymarket Optimistic Oracle System

Polymarket currently uses optimistic Oracle (OO) from UMA to settle disputes and verify actual results. This system ensures prediction accuracy by supplying vital data for smart contracts.

Contracts on Polymarket look to UMA’s OO for results when they need real-world data. In the event that there is disagreement over the outcome, the matter is forwarded to UMA’s Data Verification Mechanism (DVM).

It is now up to the UMA token holders to cast their votes and decide what should happen. In the future, this new token could be involved in this dispute resolution procedure if Polymarket goes through with its planned token launch.

Previous Funding and Recent Disputes

Due to its strong investor interest, Polymarket has raised $70 million in two rounds of funding this year. Ethereum co-founder Vitalik Buterin participated in a Series B round in which the company raised $45 million in May.

This came after GeneralCatalyst led a $25 million Series A round that was previously undisclosed. Polymarket has been involved in multiple high-profile disputes concerning UMA’s event resolution mechanisms despite its financial successes.

One of the most prominent events happened in June and revolved around a prediction market regarding Barron Trump’s role in the development of the DJT meme coin. At first, the market was settled by UMA’s oracle, suggesting that Trump was not involved.

Later on, Polymarket reversed this ruling, claiming that Barron Trump was involved “in some way.” As a result, the platform issued refunds to those who had signed the “yes” contract, a decision that caused a great deal of controversy.

In May, there was another dispute of a similar nature, this time concerning UMA’s decision to resolve a prediction on spot Ethereum exchange-traded funds (ETFs). Even though the US Securities and Exchange Commission (SEC) was still reviewing the funds’ proposals, UMA concluded that they had been approved.

Hence, Polymarket bettors contested UMA’s ruling, claiming it was made too soon.

Surging Activities

Nevertheless, Polymarket has seen a spike in activity, especially in relation to the 2024 US presidential election. So far, users have wagered an additional $223.6 million on the popular vote in addition to nearly $993.1 million on the presidential election winner.

Furthermore, the platform processed over 63,000 user predictions totaling $472.9 million in August alone. This represented a rise in volume and user participation year over year of 5,900% and 2,985%, respectively.

With a record daily volume of $37.3 million on September 11 and an all-time high of 12,649 daily users on September 18, the momentum has continued into September. Notably, 86% of trading volume and 74% of user activity over the last week were from markets connected to the US election.

Polymarket and Regulatory Concerns

Polymarket’s swift expansion has also drawn heightened attention from US authorities. Recently, the US Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behnam, voiced his concerns regarding Polymarket’s provision of services to residents of the United States without the required registration.

Behnam emphasized that the CFTC would ensure that any illegal activity is put to an end. However, it isn’t the first time Polymarket has faced regulatory issues. Two years ago, the CFTC alleged that the platform provided more than 900 event-based binary options markets without the necessary registration.

However, Polymarket reached a $1.4 million settlement with the CFTC in January 2022 and limited access for users with US IP addresses as part of the settlement.

Venture Capital Funding in the Crypto Space

The crypto industry is still being shaped by venture capital funding, with firms such as Paradigm and Andreessen Horowitz (a16z) playing leading roles. These companies employ voting mechanisms to influence ongoing projects in addition to providing funding for new ones.

Notably, over $5 billion was invested in the cryptocurrency space in Q1 of the year, and estimates for the third quarter suggest that there may be more than $2 billion injected into the industry.

Venture capital still flows despite a slowdown in token offerings such as Initial DEX Offerings (IDO), especially for seed rounds and Series A funding. Moreover, investors are now focusing on infrastructure and tool development projects rather than projects involving gaming and non-fungible tokens (NFTs).

This shift is clear from the top crypto investment deals by a16z, which totaled $208 million and included Eigen Layer, Espresso Systems, and Story Protocol.