How Polymarket Works
A plain-English guide to Polymarket, including the distinction between the offshore international platform and the new CFTC-regulated U.S. app, how prices work, who provides liquidity, and how UMA resolves disputed outcomes.
Short version: Polymarket runs two distinct platforms in 2026, an offshore international product on the Polygon blockchain that handles the largest event-contract volumes in the industry (and is geo-blocked from the U.S.), and a separate CFTC-regulated U.S. app launched in late 2025 after Polymarket’s $112M acquisition of QCEX. Both trade binary yes/no contracts at prices between 1¢ and 99¢ per share. The international platform resolves through UMA’s optimistic oracle; the U.S. version resolves through the standard CFTC framework with pre-specified sources.
The two platforms
Polymarket is unusual in operating two products simultaneously, with different jurisdictions, currencies, and resolution mechanisms. It’s worth getting this straight up front because the answer to “how does Polymarket work” depends on which one you mean.
Polymarket International (the original).
Founded in 2020 and built on the Polygon blockchain, this is the platform that processed an estimated $26 billion in trading volume in Q1 2026 and handled the largest event-contract volumes in the industry’s history during the 2024 U.S. election cycle. It settles in USDC (and as of April 6, 2026, in pmUSD, a 1:1 USDC-backed stablecoin Polymarket launched alongside its CTF Exchange V2 upgrade). The international platform is geo-blocked from U.S. residents under the terms of Polymarket’s 2022 CFTC settlement.
Polymarket US (the regulated app).
Launched in late 2025 after Polymarket’s acquisition of QCEX (an already-licensed CFTC Designated Contract Market and clearinghouse) for $112 million in July 2025. The product operates as QCX LLC d/b/a Polymarket US, settles in U.S. dollars on traditional banking rails, and is available as a native iOS and Android app. As of mid-2026 it’s in invite-only beta with a waitlist of over one million users, and the initial market menu is sports-first, NBA, MLB, NHL, English Premier League daily contracts, plus NFL and college football futures. Politics, crypto, and current-events categories are expected to follow.
How a contract works
On both platforms, every market is a binary contract on a specific question, with shares trading between 1¢ and 99¢. If the event happens, every yes share pays the equivalent of $1.00 (in the platform’s collateral); if it doesn’t, yes shares settle at $0. Yes and no prices on a contract sum to 1.00 by construction.
The U.S. app additionally surfaces American odds (–110, +150, etc.) on each contract, with one-tap switches to percent and price views. This is mostly a presentation choice, the underlying contract math is identical to the cents model, but it lowers the on-ramp for traders coming from a sportsbook.
On both platforms, you can sell a position before the contract resolves. Prices move continuously as new information arrives and as other traders take opposing sides, so a yes share bought at $0.40 can be sold at $0.85 if the event becomes more likely. This is the structural difference from a traditional sportsbook bet, which is locked in until the event settles.
Who’s on the other side: market participants
Retail traders.
The largest group by user count, particularly on the international platform, which has tens of thousands of active traders worldwide and counts retail crypto users as its core base. On Polymarket US, retail trader access is currently throttled by the invite-only beta but expected to expand as the waitlist clears.
Professional market makers.
Polymarket’s flagship markets attract dedicated market-making firms that post continuous bid and ask quotes in exchange for rebates and execution advantages. The Maker Rebates Program pays USDC rebates to liquidity providers, with the most generous rebates going to the firms posting the tightest spreads near the midpoint and the largest size. Per market-maker documentation, rewards are scored on quote participation, meaning showing up consistently with two-sided quotes, not just occasionally posting one side. The CLOB v2 upgrade in April 2026 was specifically designed to attract more institutional market-making.
Institutional and quant flow.
Hedge funds, prop firms, and crypto-native trading desks have increasingly participated in Polymarket through 2024–26. The 2024 election cycle drew in a wave of institutional capital looking for exposure to political risk without going through the operational complexity of derivatives markets. Intercontinental Exchange (ICE) made a $600 million strategic investment in Polymarket in late 2025, signaling further institutional integration.
How orders match: the CLOB
Polymarket originally launched as an automated market maker (AMM), where anyone could provide liquidity by depositing into a pool and earn a share of trading fees. The platform has since transitioned to a Central Limit Order Book (CLOB) model, where buy and sell orders are matched directly by price and time priority, the same structure used by major futures exchanges and equity markets.
The Polymarket CLOB has a hybrid architecture: order matching happens off-chain through a CLOB operator (for speed, millisecond matching rather than block-time), but every settlement executes on-chain via smart contracts (for transparency and non-custodial guarantees). The CLOB v2 upgrade in April 2026 introduced new exchange contracts, EIP-1271 smart-contract wallet support, a simplified order struct, and a faster matching engine.
For the trader, the practical effect is that Polymarket markets behave like a regular exchange, you see a bid stack and an ask stack, place limit or market orders, and your fills happen at the prices the book actually shows.
How contracts resolve
International: UMA optimistic oracle.
The international platform resolves contracts through UMA’s optimistic oracle, a decentralized dispute-resolution system where anyone can propose an outcome and anyone can challenge it. To propose, an entity calls the oracle’s proposePrice() function, posts a USDC bond (typically $750 for a standard market, sometimes $5,000+ for high-stakes ones), and submits the answer. If no one disputes within the challenge window, the proposal becomes the final outcome and the contract settles.
If someone disputes, by posting their own bond and arguing the outcome is wrong, the question escalates to UMA token holders, who vote on the correct answer. Disputed resolutions take 4–7 days. The optimistic structure works because most outcomes are uncontested (e.g., the certified election result is what it is); the dispute mechanism exists for edge cases where the resolution criteria are ambiguous or the source publishes inconsistently.
U.S.: standard CFTC framework.
Polymarket US, as a CFTC-regulated Designated Contract Market, follows the standard regulated-exchange resolution framework. Every contract’s rulebook specifies the official source for the outcome before trading begins, the rulebook is filed with the CFTC, and Polymarket US’s resolution panel marks the contract once the source publishes. There’s no on-chain dispute mechanism on the U.S. product, disputes, if any, go through the regulated exchange’s internal process and ultimately through the CFTC.
Funding, fees, and withdrawals
On the international platform, you fund a Polymarket account by transferring USDC (or pmUSD, post-April 2026) to the on-chain wallet associated with your account, typically via a centralized exchange or a fiat on-ramp. Withdrawals go back to your wallet. There are gas fees on Polygon for transfers, but they’re minimal compared to Ethereum L1.
On Polymarket US, funding is U.S. dollars on traditional rails, ACH, debit, or wire, with no crypto involved. Trading fees on both platforms are minimal compared to traditional sportsbooks, with maker rebates available on the international platform for liquidity providers. Settlement of winning positions happens automatically once the contract resolves.
Regulatory context
The two-platform structure is itself a regulatory artifact. The international platform settled with the CFTC in 2022 over its operations to U.S. residents and agreed to geo-block U.S. users. The acquisition of QCEX in 2025 gave Polymarket a separate, fully licensed U.S. exchange, sidestepping the multi-year CFTC application process by buying an already-approved DCM.
State-level legal action against prediction-market sports contracts applies to Polymarket alongside Kalshi. Polymarket was hit by a Nevada TRO in January 2026 (against operator Blockratize); Tennessee included Polymarket in its January 2026 cease-and-desist orders alongside Kalshi and Crypto.com. See our Polymarket vs Kalshi comparison for the current state-by-state picture.
Frequently asked
Is Polymarket gambling?
Polymarket’s position, like Kalshi’s, is that its contracts are CFTC-regulated financial instruments under the Commodity Exchange Act, not gambling. Multiple state regulators have argued the opposite, particularly for sports contracts, and the question is being litigated. Federal courts have so far sided with the prediction markets’ position; state cases are ongoing.
What’s the difference between USDC and pmUSD?
On the international platform, Polymarket previously settled in “bridged USDC” (USDC.e), USDC that had been bridged from Ethereum to Polygon. On April 6, 2026, Polymarket replaced bridged USDC.e with pmUSD: a 1:1 USDC-backed stablecoin native to Polymarket. The smart contract enforces the 1:1 backing, so 1 pmUSD always converts back to 1 USDC with no fees. The change was structural plumbing, the user-facing experience is essentially unchanged.
Can I lose more than I invest?
No. Each share has a maximum loss equal to its purchase price. If you buy yes shares at 40¢ and the event doesn’t happen, you lose 40¢ per share. There’s no leverage and no margin call.
Where does Over / Under fit in?
Over / Under reads every contract on Polymarket (and Kalshi) and produces an AI-generated analysis on each, surfacing whether the current market price reflects the underlying evidence, what the resolution source actually says, and how confident the read is.