There is no legal way for Web3 prediction markets to operate in Ukraine under current laws, according to a senior official involved in shaping the country’s digital economy policy.

In comments shared with CoinDesk days after Ukraine blocked access to Polymarket and nearly 200 gambling-related websites Dmitry Nikolaievskyi, chief legal officer at the Project Office for the Development of Ukraine's Digital Economy at the Ministry of Digital Transformation, revealed a deadlock for Web3 prediction markets in the country.

Nikolaievskyi said that while the decision to ban Polymarket followed existing legal procedures, the underlying problem is that the country’s legal framework doesn’t recognize prediction markets at all.

“Ukrainian legislation does not contain such a concept as ‘prediction markets,’” Nikolaievskyi said. He added that a long-delayed law “On Virtual Assets” is necessary for companies, not just individuals, to operate legally using crypto.

Until that law passes, platforms that use cryptocurrency to facilitate betting on event outcomes, including Polymarket, are effectively unlicensed gambling operators in the eyes of the state.

“This really means that there is currently no legal way for Web3 prediction markets to operate in Ukraine until the legislation changes,” he said.

Polymarket, which lets users bet on the outcome of events ranging from elections to geopolitical events, is currently restricted in more than 30 countries. Portugal is the latest in a growing list of countries cracking down on it.

Earlier, Ukraine’s National Commission for State Regulation of Electronic Communications (NKEK) issued a directive requiring internet service providers to block access to the prediction market.

'War-related' bets

The order followed a recommendation from PlayCity, Ukraine’s state gambling regulator, which cited Polymarket’s lack of a gambling license and the nature of its markets, which include bets tied to the Russia-Ukraine war.

While Nikolaievskyi insisted that the ban was based on existing legal grounds and carried out through proper channels, he acknowledged that war-related markets may have prompted regulators to act more quickly.

“We cannot rule out the fact that the presence of “war-related” bets on the platform may have accelerated the decision to block it, drawing the regulator's attention to it,” he said.

Local media outlet AIN previously reported that more than $270 million in war-linked bets had been placed on Polymarket, including markets predicting the capture of territories.

The situation leaves other prediction markets like Kalshi and PredictIt operating in a gray zone.

Though they were not included in the initial list of blocked sites, Nikolaievskyi noted that PlayCity allows anyone to file formal complaints about platforms suspected of violating gambling laws.

That means a single citizen report could prompt similar enforcement actions against other prediction markets, even if they’ve stayed under the radar so far.

There may still be a way

Still, the ban is seemingly aimed squarely at the platforms, not users.

According to Nikolaievskyi, there is currently no legal effort underway to pursue individuals who interact with platforms like Polymarket using virtual private networks (VPNs) or by interacting directly with smart contracts.

“I am not aware of any attempts by the state to prohibit its own citizens from interacting with decentralized protocols,” he said, nor has he seen examples of users being held responsible for bypassing the blocks.

Legal change isn’t likely to come soon. Nikolaievskyi said any revisions to Ukraine’s definition of gambling would have to be passed by Parliament and that “the likelihood of its revision is extremely low,” especially during wartime.