South Korean police have booked 26 Polymarket users on suspicion of illegal gambling, referring 18 of them to prosecutors after tracing their activity through public blockchain records, according to materials the National Police Agency submitted to Assemblyman Yun Kyeon-Young's office and reported by Asia Business Daily on September 17.
The Gangwon Provincial Police Agency's Cyber Investigation Unit found the 26 individuals had placed combined wagers of approximately 17.6 billion won, roughly $12.7 million. The largest single bettor accumulated stakes of about 5.7 billion won, approximately $4.1 million.
How police identified anonymous Polymarket users
Polymarket operates as a non-custodial, peer-to-peer platform with automatic settlement, meaning it does not maintain a list of users' real names. That structure did not stop investigators. Police used open source intelligence techniques to analyze public blockchain transaction records and trace individual users despite the platform's pseudonymous design.
Blockchain transactions are permanently recorded on a public ledger, which means every wallet address and every transaction amount remains visible and traceable indefinitely, even though the identity behind a wallet is not automatically disclosed. OSINT techniques used in cases like this typically combine on-chain analysis, tracing how funds moved from exchange withdrawals into a specific wallet, with off-chain data such as IP addresses, device fingerprints, or exchange KYC records where a Korean user converted won into crypto before funding a Polymarket account. This is the same fundamental method blockchain analytics firms like Chainalysis and TRM Labs use to unmask illicit crypto flows tied to sanctions evasion and money laundering, applied here to domestic gambling law enforcement instead.
Why prosecutors say Article 246 applies
South Korean police argue that Polymarket's structure meets the legal definition of gambling under Article 246 of the Criminal Act, which criminalizes wagering financial assets on outcomes determined by chance. Police cited a Supreme Court precedent holding that gambling charges can apply even when an individual's skill influences the outcome, as long as chance factors are involved and financial assets are staked for gain or loss.
Under that reasoning, the presence of features resembling legitimate derivatives investment, or the absence of specific regulatory guidelines covering prediction markets, does not prevent gambling charges from applying. Police maintain that the actual nature of the transaction, not the label attached to it, determines whether the offense has been committed.
This legal framing mirrors a distinction regulators worldwide have grappled with as prediction markets have grown. The US Commodity Futures Trading Commission has taken a different approach, treating Kalshi's event contracts as regulated derivatives subject to CFTC oversight rather than gambling, following a 2024 court ruling that allowed Kalshi to list election-related contracts despite CFTC objections. South Korea's approach, treating the same category of yes-or-no event wagering as criminal gambling regardless of underlying market structure, places it at the opposite end of the regulatory spectrum from the US framework, illustrating how differently jurisdictions can classify structurally identical financial products.
The users' defense rests on order book mechanics
The individuals who were booked argue Polymarket should be classified as a virtual asset-based derivatives market rather than gambling. Their central argument rests on structural features: contracts trade on an order book, and positions can be closed before expiration rather than only settling at a fixed maturity date, unlike typical gambling wagers that are locked until the outcome is known.
Tae-Lim Kim, Managing Attorney at AXIS Law, addressed both sides of this tension.
"There is a possibility that Polymarket could be found to formally meet the requirements of property investment and chance under the Criminal Act, since users bet virtual assets and outcomes are determined by uncertain events, making it difficult to avoid the application of domestic criminal law under the principle of nationality," Kim said. He added that "the core legal issue will be how courts evaluate the structural differences, as the platform is order book-based, supports trading of probabilistic contracts, and allows liquidation before maturity — features not found in traditional gambling."
Kim also noted a limitation in the users' defense:
"Prediction derivatives, as users claim, do not fall within the framework of the Capital Markets Act and so cannot serve as a direct defense in criminal proceedings, but do have value as a subject of legislative debate."
A regulatory blockage predates the criminal referrals
The prosecutorial referrals follow an August 18 decision by South Korea's Korea Communications Standards Commission to block domestic access to Polymarket entirely. The KCSC concluded the platform's winner-takes-all structure, tied to uncontrollable event outcomes, encourages speculative behavior, and that the platform operator's profit from transaction fees supported classifying the service as gambling assistance and unlicensed gambling operation.
Polymarket had argued at the time that it should not be regarded as a gambling site operator in Korea specifically because it does not offer Korean-language service, does not accept Korean won, and operates non-custodially without direct control over user funds. The KCSC rejected that defense outright, stating that "technical characteristics or service structure do not constitute grounds for evading the applicability of domestic law," and that the platform "effectively provides an environment for illegal gambling to domestic users."
Kim identified this rejection as potentially significant for the criminal cases now moving forward. He noted that "the KCSC's rejection of the platform's argument that it is not an operator because it is non-custodial could become a key issue in determining whether the offense of opening a gambling establishment applies in future cases," suggesting the administrative ruling against Polymarket itself, separate from the individual users, could inform how courts treat the platform's legal status when evaluating the bettors' cases.
Roman Zaika
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that, despite the nature of much of the material created and hosted on this website, HODL FM operates as a media and informational platform, not a provider of financial advisory services. The opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice, HODL FM strongly recommends contacting a qualified industry professional.
