Polymarket is currently the world's largest prediction market platform. According to publicly available data, it has over 30 million users globally, and its monthly trading volume remained at approximately $1 billion in early 2026 alone. The platform offers a wide range of predictions, covering politics, sports, macroeconomics, finance, cryptocurrency prices, and many other areas. As the Polymarket ecosystem continues to expand, a number of third-party tools have emerged. These tools, developed by entrepreneurs, aim to help platform users participate in prediction market trading more efficiently, compensating for the shortcomings of the native interface in terms of functionality and user experience. However, from the perspective of Chinese law, the situation requires careful examination. As Attorney Shao pointed out in his previous article, "What Regulatory Issues Do Crypto Prediction Market Platforms Face, Which Have Been Shared by Vitalik Buterin and Donald Trump?", crypto prediction market platforms essentially offer binary options-like products. Therefore, if Chinese entrepreneurs develop tools related to the Polymarket ecosystem, are they likely to 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: transaction terminals, data analysis tools, and news transaction tools. The tools developed by entrepreneurs also mainly revolve around these three directions. To facilitate 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 inconvenience and limited functionality of Polymarket's native interface. They offer interfaces similar to professional cryptocurrency exchanges, with core functions including market overview, batch order placement, stop-loss and take-profit orders, one-click copy trading, AI-assisted analysis, and cross-platform arbitrage. For users, the advantages are faster operation, stronger execution, and a lower barrier to entry—users can perform batch operations, set stop-loss and take-profit orders to control risk, and beginners can copy expert strategies through the copy trading function. 2. Data Analysis Tools These tools aim to solve the problem of opaque market information. These tools analyze Polymarket's publicly available on-chain data to create detailed profiles for each trading address. Core functions include trader rankings, in-depth wallet analysis (profit/loss, preferences), and identification of insider signals (such as flagging newly created but heavily invested wallets). Users can use these tools to see the movements of large funds and consistently profitable "smart money," identifying addresses that may possess insider information and thus avoiding blindly following trends. 3. News Trading Tools These tools are fast news aggregators specifically designed for Polymarket, solving the problems of delayed news access and market disconnect. They scan thousands of sources, including X (formerly Twitter), news websites, and official press releases, 24/7, and use AI to filter and score them. For users, the advantages of these tools lie in their speed—major news is pushed within seconds of its emergence; more efficient decision-making—news and market information are displayed on the same screen; and more accurate information—AI automatically filters noise and assigns importance scores, allowing users to focus only on the most valuable signals. 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," discover insider signals, and thus make decisions faster and better. Therefore, these types of products possess significant market potential and are more likely to obtain higher valuations and investments in financing. However, as Chinese entrepreneurs, while optimistic about the development potential of such businesses, they also harbor a nagging unease—whether they will face domestic legal risks if they engage in such businesses? Their concerns mainly focus on the following aspects: First, Polymarket has already obtained a Designated Contract Market (DCM) license from the U.S. Commodity Futures Trading Commission (CFTC), transforming itself from a platform in a legal gray area into a federally regulated compliant exchange. So, is it legal to develop third-party tools for such a legally qualified platform? Secondly, the functions of the three types of tools mentioned above are to provide a trading terminal, aggregate accurate news information, and conduct pure data analysis, respectively. None of them handle funds, nor do they have the function of user betting or platform commission. So, should they simply be neutral software tools? Thirdly, the users of these products are mostly overseas users, essentially making them products geared towards overseas markets. Does this mean they do not violate Chinese law? Lawyer Shao's analysis: Especially for entrepreneurs who have lived overseas for many years and are unfamiliar with Chinese law, the above misunderstanding is understandable, but this misunderstanding is precisely the most dangerous. The following will answer two core questions: First, does overseas compliance mean that Chinese entrepreneurs developing such third-party tools are legal? Although Polymarket has obtained compliance licenses overseas, from the perspective of Chinese law, such prediction market platforms have obvious gambling characteristics, which is undisputed. According to the "Opinions on Several Issues Concerning the Handling of Cross-border Gambling Crime Cases" issued by the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security in 2020, providing software development, technical support, membership development, and other services to gambling websites constitutes complicity in the crime of operating a casino. Therefore, it's not only actions involving user funds or assisting the platform in fund payment and settlement that carry legal risks. While the three types of tools mentioned above have different functions, their purpose is to allow users to use the Polymarket platform more smoothly, compensating for the shortcomings of its native interface. Objectively speaking, these tools provide Polymarket with technical support, traffic generation, membership development, and gambler recruitment services. Therefore, developing derivative third-party tools for such platforms carries legal risks related to gambling. Secondly, do tools and products targeting overseas users avoid Chinese legal risks? If such products can be accessed via VPN within China, and there are no measures to block domestic users, then according to the principles of personal and territorial jurisdiction, entrepreneurs, whether located in China or abroad, may face criminal legal risks in China. Depending on the job content and behavior patterns of those involved, the potential charges may vary, ranging from complicity in crimes such as operating a casino or illegal business operations to crimes such as illegally using information networks or aiding and abetting cybercrime. Risk Warning for Entrepreneurs: It is often most regrettable when entrepreneurs cross legal red lines in this way. Many of them possess excellent resumes and overseas study backgrounds, and are Chinese developers who have lived and worked abroad for many years. In their understanding and within their environment, Polymarket itself has obtained a compliant license and is a legally operating platform, and there are many similar third-party tools on the market. Under these circumstances, they may find it difficult to recognize the risks involved in their actions. Therefore, for entrepreneurs aspiring to work deeply in the Web3 field, it is recommended that they fully understand domestic laws and market policies, rationally assess the potential risks of their startup projects, and make prudent decisions.
Catherine
Weatherly
Kikyo
Anais