South Korea Investigates Polymarket Users on Gambling Charges
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
polymarketcrypto-regulation
Fazen Markets Editorial Desk
Collective editorial team · methodology
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South Korean authorities have opened an investigation into domestic users of the blockchain-based prediction market Polymarket for alleged illegal gambling activities, according to a report from The Block on June 5, 2026. The potential penalty for a confirmed violation is a fine of up to 10 million Korean won, equivalent to approximately $6,495. This enforcement action represents a significant escalation in the global scrutiny of decentralized finance platforms that operate in legal gray areas.
The investigation follows a 2024 ruling by South Korea's Supreme Court that clarified certain crypto-based betting activities fall under the nation's strict Gambling Act. The country maintains one of the world's most restrictive stances on gambling, with citizens prohibited from betting even in overseas casinos. The current probe is part of a broader global trend, including ongoing regulatory actions by the U.S. Commodity Futures Trading Commission (CFTC) against prediction markets for operating unregistered swap facilities. The catalyst appears to be increased transaction volume on these platforms from South Korean IP addresses, drawing the attention of financial surveillance units. This action coincides with the Financial Services Commission's wider crackdown on unauthorized crypto services following the Terra-Luna collapse of 2022, which caused an estimated $40 billion in losses and prompted stricter enforcement.
South Korea's potential fine of 10 million won ($6,495) for individual users is a fixed administrative penalty. This amount is separate from potential criminal charges that could involve larger fines or imprisonment. Daily trading volume on global prediction markets has fluctuated between $1 million and $5 million in recent months, according to independent data aggregators. The South Korean won is the third-most traded fiat currency in the crypto market, accounting for nearly 6% of global volume, indicating a high level of local retail participation. A 2025 survey by a local fintech group estimated that over 6 million South Koreans, approximately 12% of the adult population, have engaged with crypto assets. This level of penetration makes regulatory actions particularly impactful on a large user base.
Platform | Regulatory Status (as of Q2 2026) | Key Jurisdictional Challenge
---|---|---
Polymarket | CFTC action in US; gambling probes in Asia | Classification as gambling vs. financial market
Kalshi | Regulated as a designated contract market by CFTC | Strict limits on event types allowed for trading
PredictIt | Operates under a no-action letter from CFTC | Limited to 5,000 traders per market cap
The immediate market impact is a potential chilling effect on user activity for prediction markets with South Korean users, which could reduce overall platform liquidity. The investigation may create a near-term headwind for venture capital firms with exposure to the decentralized prediction market sector, such as those that participated in Polymarket's $70 million Series B round in 2025. Shares of regulated South Korean online brokerages like Kiwoom Securities [039490:KS] could see neutral to positive sentiment as regulatory scrutiny pushes activity toward licensed entities. A counter-argument is that dedicated users may simply migrate to virtual private networks (VPNs) to obfuscate their location, limiting the long-term effectiveness of the crackdown. Trading flow data suggests some capital may rotate into more established crypto assets like BTC and ETH, which are traded on fully licensed South Korean exchanges such as Upbit and Bithumb.
The next significant catalyst is the conclusion of the police investigation, expected by the end of Q3 2026, which will set a precedent for future cases. Investors should monitor for any official guidance from South Korea's Financial Services Commission, potentially during its semi-annual crypto policy review in late July. A key level to watch is the volume of trades originating from South Korea on Polymarket and similar platforms over the next quarter; a sustained drop below 2% of global volume would indicate the enforcement is having its intended effect. If the fines are upheld in court, it could trigger similar actions from other Asia-Pacific regulators in markets like Japan and Singapore, which have comparable gambling laws.
South Korean law defines gambling as any activity where a prize of economic value is determined by chance. Prosecutors are arguing that using cryptocurrency to bet on real-world events on Polymarket meets this definition, even if the platform markets itself as a prediction market. The legal distinction often hinges on whether skill or chance is the predominant factor in determining outcomes, a gray area that courts are now being asked to clarify. This differs from regulated financial derivatives, which are based on underlying securities and traded on licensed exchanges.
The Terra-Luna collapse in 2022 led to arrests of project founders and new legislation focused on consumer protection and exchange licensing. This user-focused probe is a novel approach, targeting the demand side rather than the supply side of a crypto service. It mirrors tactics used against users of illegal online sports betting sites, marking a convergence of financial and gambling enforcement. The maximum fine is consistent with penalties for other administrative gambling violations, but it sets a new precedent for applying these rules to decentralized crypto applications.
While blockchain transactions are pseudonymous, most users interact with prediction markets through centralized front-end websites and mobile applications that collect IP addresses and require know-your-customer (KYC) procedures for fiat on-ramps. This creates identifiable points of enforcement for regulators. Fully decentralized interfaces are more difficult to police but often have poor user experiences that limit adoption. Regulatory technology (RegTech) firms are developing blockchain analytics tools that can trace funds to regulated exchanges where identities are known, increasing enforcement capabilities over time.
The investigation signals a hardening regulatory stance that treats certain DeFi activities as traditional gambling.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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