QUICK TAKE

• Polymarket users are betting on the outcome of Ethereum ETF approval, which could lead to an $11 million dispute.
• The contention revolves around ambiguous resolution terms, particularly which filings need approval for the market to resolve to “Yes.”
• The SEC’s decision on Ethereum spot ETFs is expected at 9:30 PM London time on Thursday.
• Approval of both 19b-4 and S-1 filings is required before trading can commence, complicating the bet’s resolution.

The impending decision by the Securities and Exchange Commission (SEC) on the approval of Ethereum spot ETFs has stirred significant activity on Polymarket, a prediction platform where users wager on the outcomes of various events. This particular scenario has the potential to spark an $11 million dispute due to unclear resolution terms regarding what constitutes “approval.”

Polymarket allows users to bet on whether a specific event will occur. In this case, the event in question is the approval of an Ethereum ETF by the SEC. The market, titled “Ethereum ETF approved by May 31,” has attracted substantial interest, with $10.8 million on the line, an increase of $3 million in just 24 hours. Bettors currently give a 65% chance that the approval will happen.

The crux of the dispute lies in the detailed requirements for ETF approval. Before an exchange-traded fund (ETF) can start trading, it must receive approval for both 19b-4 filings and S-1 filings. The SEC’s decision on Thursday pertains only to the 19b-4 filing, and it could be several months before the S-1 filings are also approved, which is necessary for the ETF to begin trading.

This distinction has led to confusion and differing interpretations among Polymarket users. Some believe that the market should resolve to “Yes” only if both filings are approved by the deadline, while others argue that the approval of just the 19b-4 filing is sufficient.

One of the largest bettors on the platform, known as JustKen, who holds around 121,000 “No” shares, argues that both the 19b-4 and S-1 filings must be approved for the ETF to be considered fully approved. Conversely, another prominent bettor, 0xsmolbear76, who holds approximately 261,000 “Yes” shares, believes that any credible source confirming the ETF’s approval should trigger the market to resolve to “Yes.”

As of now, Polymarket has not made any official statements regarding the dispute, leaving bettors in a state of uncertainty.

This isn’t the first time Polymarket has faced such significant contention. Last year, a $2.2 million market arose from the question, “Will the missing Titan submarine be found by June 23?” This incident underscores the importance of clear and precise terms for bet resolution on the platform.

Polymarket has been gaining traction and credibility in the crypto world, evidenced by its ability to raise $70 million from prominent figures like billionaire Peter Thiel and Ethereum co-founder Vitalik Buterin. The platform’s popularity is also reflected in its active user base; on Wednesday alone, 1,773 active wallets generated $2.8 million in total volume. The most active market on Polymarket is the 2024 US election market, which has seen over $132 million in bets, with former President Donald Trump currently holding a 55% chance of winning according to bettors.

The outcome of the SEC’s decision on Thursday will undoubtedly have significant implications for both the Ethereum ETF market and the bettors on Polymarket. If the SEC approves the 19b-4 filing but delays the S-1 filing, it could lead to substantial disputes and potential losses, highlighting the need for clear and comprehensive regulatory and betting guidelines.

In conclusion, the anticipation surrounding the SEC’s decision on the Ethereum ETF has not only affected the crypto market but has also created a high-stakes scenario on Polymarket. The platform’s users are waiting with bated breath to see how the decision will unfold and what it will mean for their bets. This situation exemplifies the growing intersection between regulatory decisions and prediction markets in the evolving landscape of cryptocurrency.