Polymarket’s on a hot streak. 

The crypto-based prediction market, which lets users place bets on real-world events, has seen a surge in popularity. Trading volume hit a record $503 million in September and has already passed $900 million this month. Its active users just crossed the 80,000 mark, and its “total value locked” — a measure of the assets tied up in a crypto platform — climbed from less than $10 million at the start of the year to nearly $200 million in mid-October.

Polymarket lets users bet on a variety of “event contracts,” from what will be the year’s highest-grossing movie to the size of the next Fed rate cut. But its recent growth has been driven by bets on the US presidential election. The site has seen more than $2 billion in betting volume on who’ll win in November.

Polymarket has moved to capitalize on what it hopes is its breakout moment. Last month The Information reported that Polymarket was said to be in talks to raise $50 million from investors, following a combined $70 million in funding that the New York-based company announced in May. 

Now, according to the same Information report, Polymarket is considering launching its own token, the appetite for which could be enormous.

The decentralized math behind a Polymarket token push

While Polymarket’s holding its digital cards close to its chest, the logic behind a Polymarket token seems a little clearer: revenue, and a hope for some regulatory breathing room.

That’s according to web3 consultant Oliver Page, who broke down why the betting platform might want its own token. For starters, Page explained that the tokens could be used as a fundraising tool. In that scenario, the company could offer them to accredited investors in exchange for funding. 

Like any fast-growing business, Polymarket has been on the hunt for cash. 

Earlier this year it raised $45 million in a Series B round from investors, including PayPal cofounder Peter Thiel and ethereum creator Vitalik Buterin. Its Series A round of $25 million saw participation from crypto-investment firm Polychain and Airbnb cofounder Joe Gebbia, among others. That followed a $4 million seed round in 2020.

But more broadly, Page said, a Polymarket token could be a play at decentralizing the project even further to avoid regulators’ ire. 

“By decentralizing the project and making it community run, current Polymarket stakeholders can distance themselves from the protocol, bringing decentralized power and removing central authority,” Page told Sherwood. That could break down “a present roadblock to growth.”

In 2022, the Commodity Futures Trading Commission levied a $1.4 million fine on Polymarket in connection with failing to register with the regulator. As part of the settlement, Polymarket agreed to stop serving people in the US. Its terms of use still bars “US persons.”

What a Polymarket token could look like

A Polymarket token could take many forms, but for now the smart money’s on a “governance token.” 

That typically grants holders the ability to vote on changes to an on-chain project. Changes could include software upgrades, new features, and/or grant issuances. Essentially, governance tokens decentralize a project’s leadership and decision-making processes, while hopefully increasing user adoption.

“I believe that the token would be highly likely to have governance capabilities,” Page told Sherwood.

In the case of Polymarket, it could be implemented in several ways. A governance-led approach could see token holders proposing changes to Polymarket’s rules. Or users might create new bets on the protocol using the token. 

Page added that a Polymarket token could play a key role in dispute settlement. For example, if a bet doesn’t resolve cleanly, token holders might be able to weigh in on a resolution. Currently, Polymarket uses the UMA protocol, a decentralized oracle provider, to settle bets and disputes.

One thing a Polymarket token likely wouldn’t be used for, according to Page: placing bets. Page suggested that a potentially volatile token could scare away bettors not interested in cryptocurrency price swings. Right now, USDC, the second-largest US-dollar-backed stablecoin, is the only asset Polymarket users can use to place wagers on the platform.

More than a token launch

Polymarket is the biggest name in the prediction-market game. 

It’s done something many crypto products have struggled to accomplish: broken free of the crypto bubble as its odds are cited by the mainstream press. As such, any token it launched could set the standard for the rapidly growing industry.

“Now Polymarket has come and taken web3 by storm, making inroads to the non-web3 natives’ market,” Page said. “The opportunities and possibilities which binary options hold make prediction markets an extremely exciting sector.”

Token or no, Polymarket’s looking at increased competition. Last month, crypto-market-maker Wintermute announced the launch of its own prediction market, which will focus on elections. And in early October, a federal judge legally allowed election-prediction markets in the US.

Polymarket did not respond to a request for comment by the time of publication.

Tarang Khaitan is a reporter who has written for Decrypt and The Defiant.