Author: Shao Shiwei
Polymarket is currently the world's largest prediction market platform. According to public data, it has over 30 million global users, and as of early 2026, its monthly trading volume remains at approximately $1 billion. The platform covers an extremely wide range of predictions, including politics, sports, macroeconomics, finance, cryptocurrency prices, and many other fields.
With the continuous expansion of the Polymarket ecosystem, a batch of third-party tools has also emerged. These tools, developed by entrepreneurs, aim to help platform users participate in prediction market trading more efficiently and compensate for the shortcomings of the native interface in functionality and user experience.
However, from the perspective of Chinese law, the situation requires careful examination. As Lawyer Shao pointed out in the previous article "The Crypto Prediction Market Platform Shared by Vitalik and Trump: What Regulatory Issues Does It Face?", crypto prediction market platforms essentially provide binary options-like products.
Therefore, if Chinese entrepreneurs develop tools related to the Polymarket ecosystem, would they face domestic legal risks?
What are the three types of third-party tools in the Polymarket ecosystem?
According to information compiled by the Changan I Biteye content team, the third-party tools emerging in the Polymarket ecosystem can be roughly divided into three categories: trading terminal tools, data analysis tools, and news trading tools. The tools developed by entrepreneurs also mainly focus on these three directions. To facilitate the subsequent analysis of the legal risks of these tools, a brief introduction to each type is provided here.
1. Trading Terminal Tools
These tools primarily address the issues of inconvenient operation and limited functionality of the Polymarket native interface. They offer interfaces similar to professional cryptocurrency exchanges, with core functions including market overview, batch order placement, take-profit and stop-loss orders, one-click copy trading, AI-assisted analysis, and cross-platform arbitrage.
For users, the benefits lie in faster operation, stronger execution, and lower barriers to entry—users can operate in batches, set take-profit and stop-loss to control risks, and even beginners can replicate the strategies of experts through the copy trading function.
2. Data Analysis Tools
These tools aim to solve the problem of market information opacity. By analyzing Polymarket's public on-chain data, they create detailed profiles for each trading address. Core functions include trader leaderboards, in-depth wallet analysis (profit/loss, preferences), and identifying insider signals (such as flagging newly created wallets with heavy positions).
With these tools, users can track the movements of large capital and consistently profitable "smart money," identify addresses that may possess insider information, and thus avoid blindly following the herd.
3. News Trading Tools
These tools are custom fast news aggregators designed specifically for Polymarket, solving the problem of lagging news acquisition and disconnection from the market. They scan thousands of sources, including X (formerly Twitter), news websites, and official press releases, 24/7, filtering and scoring them using AI.
For users, the advantages of these tools lie in greater speed—major news is pushed within seconds; more efficient decision-making—news and market data are displayed simultaneously; and more accurate information—AI automatically filters out noise and assigns importance scores, allowing users to focus only on the most valuable signals.
Three Common Compliance Questions from Entrepreneurs
From an entrepreneur's perspective, these third-party tools have their significance and value. In their view, the core goal is to help users track "smart money" and discover insider signals, enabling faster and better decision-making.
Therefore, such products have significant market potential and are also more likely to attract higher valuations and investments during financing.
However, as Chinese entrepreneurs, while optimistic about the development potential of such businesses, they may also harbour a lingering unease—would engaging in such businesses expose them to domestic legal risks? Their confusion mainly focuses on the following aspects:
First, Polymarket has now obtained the "Designated Contract Market (DCM)" license granted by the U.S. Commodity Futures Trading Commission (CFTC), transforming from a platform in a legal grey area to a federally regulated compliant exchange. So, developing third-party tools for such a legally qualified platform should be legal, right?
Second, the functions of the three types of tools mentioned above are respectively providing trading terminals, aggregating precise news information, and performing pure data analysis. None of them handle funds, nor do they have user betting or platform fee functions. So, shouldn't they be considered neutral software tools?
Third, the users of these products are mostly overseas, essentially making it an overseas-oriented product. So, does this mean it does not involve violations of Chinese law?
Lawyer Shao's Analysis
Especially for entrepreneurs who have lived overseas for many years and are unfamiliar with Chinese law, having the above misunderstandings is understandable, but such misunderstandings are also the most dangerous.
The following will address two core questions:
First, does overseas compliance mean that it is legal for Chinese entrepreneurs to develop such third-party tools?
Although Polymarket has obtained compliant licenses overseas, from the perspective of Chinese law, such prediction market platforms have clear gambling-related characteristics, which is not controversial. According to the "Opinions on Several Issues Concerning the Handling of Cross-border Gambling Criminal Cases" issued by the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security in 2020, providing services such as software development, technical support, and member development for gambling websites constitutes an accomplice to the crime of opening a casino.
Therefore, legal risks do not only arise from involving user funds or helping platforms with fund payment and settlement. Although the three types of tools mentioned above have different functions, they all aim to enable users to use Polymarket platform functions more smoothly and compensate for the deficiencies of its native interface functions. Objectively, these tools provide services such as technical support, traffic generation, member development, and attracting gamblers for the Polymarket platform. Therefore, developing derivative third-party tools for such platforms carries legal risks related to gambling.
Second, if the tools and products are targeted at overseas users, does that mean they do not involve Chinese legal risks?
If such products can be accessed within China via VPN, or even without taking any measures to block domestic users, then according to the principles of personal jurisdiction and territorial jurisdiction, regardless of whether the entrepreneur is located domestically or abroad, they may face Chinese criminal legal risks. Depending on the work content and behavioral patterns of the involved personnel, the charges may vary. In serious cases, they may constitute an accomplice to the crime of opening a casino or illegal business operation; in minor cases, they may involve crimes such as illegal use of information networks or aiding information network criminal activities.
Risk Warning for Entrepreneurs
It is often most regrettable when entrepreneurs of this type cross the legal red line. Many of them have excellent resumes, overseas study backgrounds, and are Chinese developers who have lived overseas for many years.
In their cognition and environment, Polymarket itself has obtained a compliant license and is considered a legally operating platform. Moreover, there are numerous similar third-party tools on the market. In such circumstances, it is difficult for them to recognize the riskiness of their own actions.
Therefore, for entrepreneurs aspiring to delve deep into the Web3 field, it is recommended to fully understand domestic laws and market policies, rationally assess the potential risks of their entrepreneurial projects, and make decisions cautiously.
