Author: Jeff John Roberts, Niamh Rowe, Fortune; Translated by: 0xxz@Golden Finance

Every election cycle seems to unveil a new forecasting star.

In 2008 came CNN’s John King and his “magic wall” of colorful election data. Later cycles saw the rise of “the two Nates” (Nate Silver and Nate Cohn), whose statistical journalism made gimmicks like the New York Times’ prediction needle a fixture of political coverage.

In 2024, all eyes are turning to the new election-year darling: Polymarket.com.

The blockchain-based betting site has become a go-to for politicians as it has repeatedly predicted major election developments in advance. For example, in the past few months, Polymarket predicted President Joe Biden's abandonment of his reelection bid and Donald Trump's selection of JD Vance as his running mate. The site's reputation has grown so much that Nate Silver himself has agreed to join the company as an advisor.

Little known outside of cryptocurrency circles, Polymarket founder Shayne Coplan is a 26-year-old New York native who, by the looks of it, should be touring with an alternative rock band rather than running one of the most influential websites in contemporary politics.

Coplan has so far avoided the spotlight, but that could change in the near future as Polymarket — which has raised $70 million in funding — continues to gain more visibility in U.S. politics.

Polymarket founder Coplan

The Growth of Encrypted Disciples

At a recent dinner in Manhattan, Coplan, dressed in jeans and a leather jacket, was invited by a venture capital firm that convened its portfolio startups to speak with members of the media. Coplan was easily identifiable because of his tousled, curly hair and casual demeanor, which set him apart from other founders.

While venture capitalists like to say they don’t have favorite portfolio companies, organizers were careful to point to “the Polymarket team” as the people most worth getting to know. Coplan, however, seemed in no rush to make the rounds, and after a few polite words, he left as the entrees arrived, apologetically announcing that he was off to a concert in Brooklyn.

Coplan is very familiar with New York. He was raised by his mother on the Upper West Side and attended public school in Hell’s Kitchen, near the theater district. As a teenager, he learned to code and, according to crypto lore, was the youngest participant in the initial Ethereum sale in 2014 — when the token was priced at 30 cents; today, it trades for about $3,500. Coplan later pursued a computer science degree at New York University but dropped out before graduation to pursue his growing obsession: cryptocurrencies and prediction markets.

“He wants to talk about it forever. It’s his life. He lives by it,” said Rob Hadick, a partner at venture capital firm Dragonfly, which is also an investor in Polymarket. He added that during their initial meeting, rather than a formal conference room pitch, Coplan proposed a walk, which turned into a two-hour stroll around New York, during which Coplan whispered about prediction markets in Hadick’s ear.

As books like The Wisdom of Crowds explain, using collective predictions to determine the likelihood of future events is often more reliable than consulting experts. The concept is not new, and in fact, variations of it — including market-based prediction markets — have been around for centuries. While there are other online betting platforms, such as Ireland's Paddy Power, which allows users to bet on everything from sports to politics, Coplan said Polymarket is different.

“It’s more like a derivatives platform where the pricing of those derivatives becomes priceless real-time information,” Coplan said in a text message, noting that odds are determined continuously by a group of bettors rather than by a centralized oddsmaker. (Polymarket is also known for using smart contracts to settle and pay out bets — specifically, through Polygon, a sublayer of the ethereum blockchain.)

In recent months, Coplan has had opportunities to speak directly to politicians about the benefits of his site, including at a breakfast with Florida Gov. Ron DeSantis. He also retweeted a message last week showing images of the site displayed around the Republican National Committee’s headquarters — but he has so far been careful not to reveal his political leanings.

When asked for a formal interview — something Coplan hasn’t done since Polymarket first gained attention in 2020 — Coplan politely declined, citing a busy schedule.

Coplan’s online presence is minimal. A few photos online show a 20-year-old without curls, giving a cryptocurrency speech at the 2018 Bitcoin Miami conference and taking a boat cruise. But otherwise he has avoided media attention — a luxury he may no longer have as Polymarket becomes a household name.

Betting on an uncertain future

Most people are familiar with online betting sites, both American sportsbooks and overseas ones, which allow gamblers to bet on everything from elections to the odds of alien landings. Polymarket offers all of those bets, too, but its inner workings are very different.

The probability of a particular event is determined not by a centralized oddsmaker, but by Polymarket users, who can buy "shares" of a particular outcome. For example, on July 31, those who believe Donald Trump will choose JD Vance as his running mate can pay 8 cents, and the value of their contract will rise to $1 if the result comes true (or fall to zero if the result does not come true at the time of the election). Of course, prices will fluctuate with news events.

For now, Polymarket has resisted pursuing the most obvious potential revenue stream: a cut of bets placed on the site. Instead, its evolving business model, which includes a forthcoming feature that lets users pay with credit cards instead of cryptocurrencies, appears to involve a media business and, possibly, a consulting business. Semafor reported this week that Polymarket is launching a series of newsletters, while also working with major media outlets to include its data in stories (a chart from the site has already appeared in The Wall Street Journal). The company has not disclosed how much revenue, if any, it will generate from these investments.

Polymarket may also charge fees for bets that appear on its site. Currently, the company collects suggestions on its Discord platform and then notifies its community which ones will be added. Some recently added bets include bets on Simone Biles' medal count and the likelihood of a military conflict between the United States and Iran before August 31. However, there is no indication that Polymarket plans to let companies pay to list bets.

Polymarket shares become the hottest bet?

Polymarket isn’t the first site of its kind. Earlier crypto projects like Augur and Gnosis similarly offered a decentralized betting platform, but they never gained traction. In contrast, Polymarket has become a fixture on political Twitter and is the top site (85%) for online bettors on the outcome of the U.S. presidential election, according to Nick Tomaino, whose venture fund 1Confirmation has invested in all of these projects.

The site’s rapid growth — it attracted a record 42,000 bettors on July 1, up from 4,000 in January — is perhaps surprising, given that betting on elections is illegal in the United States, American bettors are barred from using the platform, and Polymarket requires users to connect crypto wallets and pay with the USDC stablecoin. These hurdles also raise the question of whether Polymarket bettors, who are mostly non-Americans steeped in crypto culture, can make reliable predictions about U.S. election events.

Tomaino acknowledged that the sample would be better if Americans were able to participate, but he said Polymarket still provides a very strong signal. That’s because, like other prediction markets, it not only reflects the “wisdom of the crowd,” but is also based on a group of people who have a financial stake in the outcome and are likely to be more knowledgeable.

When evaluating Polymarket and the various betting markets, it’s also useful to remember that the possible outcomes they show are only probabilities. In 2016, most pollsters and betting sites gave Hillary Clinton a 75% to 85% chance of winning. The fact that she lost did not discredit those predictions, but rather reflected the smaller but very real possibility of Donald Trump winning, which has already come true.

Polymarket is not only a striking new addition to the U.S. election scene, it’s also a hot startup that has raised $70 million to date, including a $45 million round in May, from influential investors including not only cryptocurrency moguls like Ethereum founder Vitalik Buterin and early Coinbase employees, but also high-profile venture capitalists like Peter Thiel.

Still, it’s unclear exactly how Polymarket plans to make money. According to Tomaino, the site’s current revenue is “very low,” even though it covers overhead costs like its New York City office and 25 to 30 employees.

Polymarket’s biggest challenge may be convincing regulators to allow it to operate in the U.S. In 2010, the U.S. Commodity Futures Trading Commission banned derivatives, or so-called event contracts, involving terrorism and other illegal activities, including “gambling,” under the Dodd-Frank Act. Although the CFTC did not define gambling at the time, the commission fined Polymarket $1.2 million in 2021 for operating in the U.S. and is currently working on new regulations that would explicitly ban election betting.

Tomaino, the investor, isn’t worried about any of this. He thinks it’s misguided to worry that election betting will undermine the political process, noting that such betting has provided insight for more than a century, while super PACs — which allow anonymous donors to spend millions of dollars on behalf of candidates — appear to pose a greater threat to the integrity of elections. As for Coplan, Tomaino said he may become more visible in the coming months. But for now he’s “just single-mindedly focused on the product.”