In community terms, the oracle is 'favoring the whales'.
Written by: Splin Teron
Translated by: Luffy, Foresight News
The pitfalls I'm about to discuss, I've fallen into them myself and lost quite a bit of money because of it.
There's no need to deny the current trend. Google Trends shows that the search volume for 'prediction markets' is now on par with the search volume for 'memecoin' at the beginning of the year.
But first, let's quickly understand the basic operation of prediction markets:
Deposit USDC;
Purchase a result token, either 'bullish' (Yes) or 'bearish' (No);
Tokens will be locked in the smart contract until the event concludes;
After the dust settles on the event, the oracle will lock in the result;
If the result you bet on is correct, you can redeem the token and gain profits; if you bet incorrectly, the principal you invested will be lost.
So... the oracle is an external source of truth. On the Polymarket platform, this role is played by UMA.
After the event concludes, the oracle sends a signal to the contract: 'Yes' or 'No'. It is at this time that funds will be redistributed among participants.
The trust of the entire market relies on the oracle. If the oracle makes a 'misjudgment' or determines results in a questionable manner - even if the facts are obvious, some will profit and some will lose.
And the problem is... the oracle's 'misjudgment' is actually quite frequent. Or, in community terms, the oracle is 'favoring the whales'!
Case 1: Ukraine and Trump's mineral agreement
March 2025: The prediction market on the Polymarket platform regarding 'Ukraine and Trump reaching a mineral deal' ultimately determined the result as Yes, but in reality, no deal was reached, and the whales of UMA forced this decision. Users lost millions of dollars as a result, but Polymarket announced that it would not provide any refunds.
Case 2: Will TikTok be banned before May 2025?
January 2025: The prediction market on the Polymarket platform regarding 'Will TikTok be banned before May 2025' ultimately determined the result as Yes. Although the U.S. Supreme Court approved the relevant legislation, TikTok was not actually banned and continues to operate normally. The UMA oracle directly locked in this result, skipping the usual dispute resolution process. At that time, the market involved approximately $120 million. Users accused this of manipulation, but the platform still did not provide refunds.
Case 3: Will Zelensky appear in traditional formal wear?
July 2025: The prediction market on the Polymarket platform regarding 'Will Zelensky appear in traditional formal wear' attracted over $210 million in betting funds. Although several media outlets, even the creators of the formal wear, confirmed that Zelensky was indeed wearing a suit, the UMA oracle determined the market result as No. They defended this result with a vague explanation, claiming that 'the core intention of the market was a suit with a tie', and this statement was actually protecting the whales and helping them maintain their positions.
Case 4: Will the Houthis attack Israel before August 31?
August 2025: The prediction market on the Polymarket platform regarding 'Will the Houthis attack Israel before August 31' had a trading volume of $13 million, ultimately determining the result as Yes. However, official news has confirmed that the missiles were intercepted mid-air. According to the rules, this result should have been determined as No.
I don't want to list all the cases just to fill space... If you want to know more, you can search on Reddit or use Grok, ChatGPT.
Why do markets with obvious results ultimately determine outcomes that contradict the facts? Who really has the decision-making power in the voting?
I don't know the answer, but one key point is simple: this is indeed happening, and people are losing money because of it!
What filtering methods can help you avoid risks before trading?
Practice good capital management: the amount wagered on a single market should not exceed 1%-3% of your deposits;
Choose events with clear sources of information, such as court rulings, official statements, on-chain data, etc.;
Check market liquidity and the list of top holders;
Take profits early, for example, exit when profits reach around 95%, don't wait for the final result to be determined.
And I hope you understand that prediction markets are more akin to gambling than investing. If you can't control the impulse to bet, it's better to stay away from this field...
But if you decide to delve deeper, I've attached a distribution map of different protocols to help you enter the world of prediction markets.
