In the past two weeks, the crypto prediction market has become a hotspot of dual focus for policy and capital. Anomalous betting on the 2025 Nobel Peace Prize on Polymarket saw a huge position emerge before the award announcement, rapidly changing the odds. This was followed by continuous investigations and reports from the Nobel Committee and the media, raising questions about the "instant information reflection" capability based on crypto contracts and the potential for insider liquidity.
This event highlights two realities: first, decentralized or semi-decentralized prediction platforms naturally reflect the information and capital power held by participants, leading to significant price movements in a short time; second, when events concern national or international important matters, traditional regulators and authoritative institutions will quickly intervene, demanding clarification on whether there has been information leakage or manipulation. Follow-up reports from mainstream media indicate that such platforms are moving from the margins of gaming to the forefront of public governance issues, with increasing regulatory attention.
Meanwhile, institutional capital has not exited the scene. ICE announced a strategic investment in Polymarket, planning to distribute Polymarket's data to institutions, marking the prediction market's inclusion in the traditional financial infrastructure's vision. Institutionalization can bring greater liquidity and compliance tools, but it may also push decentralized products into a more clearly regulated category, altering the original user and governance structure.
On the technical route, the established protocol Augur proposed a "restart" and a roadmap for new oracle technologies, attempting to enhance market reliability through stronger oracles and dispute resolution mechanisms; Gnosis is advancing a combinatorial infrastructure in Conditional Tokens and AI agents, emphasizing the future of composability and automated market making. These two paths reflect different choices in the industry regarding accuracy, speed, and compliance.
An undeniable macro backdrop is the overall volatility of the crypto market. When the global market is shaken by trade frictions, macro policies, or asset revaluations, the behavior of prediction markets is often amplified: price signals are driven by both real information and changes in macro risk appetite. The price pullback of Bitcoin and Ethereum in early October illustrates that under market panic, the liquidity and spreads of prediction contracts can rapidly deteriorate, affecting signal interpretation.
For market participants and regulators, there are several pragmatic paths to consider at this stage: first, establish a more transparent identity and source of funds review mechanism to reduce manipulation concerns arising from significant positions, while introducing gradual delays or segmented settlements in major event markets to mitigate the impact of instant leaks; second, encourage collaboration with traditional financial institutions (such as ICE) to develop data distribution and compliance interfaces for qualified institutions, while retaining lightweight decentralized markets for smaller participants; third, strengthen technical anti-manipulation capabilities—more reliable oracles, off-chain audits, and verifiable order book histories can enhance the credibility of the market's evidence chain.
Looking ahead to the short to medium term, if regulatory tightening and institutionalization accelerate in parallel, the prediction market may experience "layered development": one layer is a quasi-centralized market aimed at institutions and significant public events, subject to stricter compliance constraints; the other layer retains a decentralized experimental zone on-chain for testing new contracts, AI market making, and niche topics. The liquidity and information transmission between the two will be key in determining which type of market can survive long-term.
In conclusion, the Polymarket incident is not an isolated "rumor," but a signal: when prediction markets touch on public decision-making or significant international events, relying solely on decentralized technology cannot completely replace traditional governance and compliance frameworks; at the same time, the technological upgrades from institutional capital and project parties also provide the industry with opportunities to restore trust and scale. The future winners will be those products and organizations that can find a robust balance between transparency, compliance, and decentralized value.
Related: Democratic Senator Proposes "Restricted List" for DeFi Protocols, Sparking Strong Protests
Original text: “The Institutionalization and Regulatory Storm: From Polymarket to Augur's Game”
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