DEC 19, 2023
Polymarket activity under scrutiny in Taiwan due to election contracts
Taiwanese law enforcement is currently delving into the activities of online influencers and community members promoting Polymarket contracts related to the upcoming presidential election which is due to be held on Jan. 13.
Polymarket is a New York-based Ethereum-centric prediction market. The platform runs on the Ethereum layer-2 scaling solution network Polygon. The project invites platform users to bet on the outcomes of a broad spectrum of events, ranging from politics to entertainment.
Users deposit USDC stablecoin, choose an event to bet on and purchase “outcome shares” through USDC. The user has the ability to trade those shares anytime before the resolution of the contract.
Possible election law violations
The Taiwanese investigation came to light in a report by Taiwan-based crypto publication BlockTempo, which was published last week. The investigation comes as concerns arose about potential violations of Taiwan’s Presidential and Vice Presidential Election and Recall Act, which explicitly prohibits gambling on election outcomes.
Multiple influencers and crypto community members have reportedly been subpoenaed for their involvement in Polymarket contracts, allowing users to place bets on the January election. At present, the betting pool for the election holds over $300,000, with a market prediction favoring the Democratic Progressive Party’s Lai Ching-te, also known as William Lai, with a 78% chance of winning.
However, the legality of such betting activities is in question under Article 88–1 of Taiwan’s election law. It stipulates that anyone gambling on the outcome of an election or recall in a public place or a place open to the public may face imprisonment, short-term detention or a fine of up to NT$100,000 ($3,196.85).
Sherman Lin, an attorney at Taipei-based Lin & Partners, emphasized the seriousness with which law enforcement views gambling activities related to presidential elections in Taiwan. He explained that broad legal interpretations under the Presidential Election and Recall Act have led to investigations and convictions of gambling website operators targeting Taiwanese gamblers. Lin stated:
“Law enforcement agencies in Taiwan are vigilant in investigating any gambling activities related to presidential elections.”
“Broad legal interpretations have been applied to gambling crimes under the Presidential Election and Recall Act, leading to investigations and convictions of gambling website operators in Taiwan targeting Taiwanese gamblers,” he added.
Prohibited in United States
Despite potential legal consequences for gambling activities in Taiwan, including participation, promotion and platform hosting for betting pools like Polymarket, Lin pointed out that enforcing actions against overseas entities poses jurisdictional challenges. Taiwan’s legal reach is primarily limited to domestic actors, creating complexities in addressing decentralized platforms like Polymarket.
Lin suggested that law enforcement may focus on online influencers who promoted the Polymarket contract, as seen in previous cases involving the collapse of the unlicensed crypto exchange JPEX in Hong Kong.
Moreover, while there are legal precedents for pursuing centralized entities organizing election gambling, Lin highlighted that no established legal precedent in Taiwan currently exists for decentralized platforms organizing election betting.