The President Wears No Suit: Polymarket's $160 Million Problem

Forbes

09-07-2025

Ukrainian President Volodymyr Zelensky arrives for a social dinner at the 'Huis ten Bosch' Royal ... More Palace during a North Atlantic Treaty Organization (NATO) Heads of State and Government summit in The Hague, on June 24, 2025. NATO leaders hold a two-day summit on June 24 and 25 in The Hague. (Photo by JOHN THYS / AFP) (Photo by JOHN THYS/AFP via Getty Images) AFP via Getty Images
Prediction markets have evolved over the past five years from academic thought experiments into a mainstream financial phenomenon. The sector has gained serious credibility, despite the outlandish bets people make on crypto platforms like the predictions market leader Polymarket, which boasts prominent analyst Nate Silver as an adviser. Users can wager on everything from presidential elections to papal successions. And yes, even whether Jesus Christ will return in 2025.
Polymarket operates on Polygon, an Ethereum Layer 2 solution, using a hybrid-decentralized system and reportedly generated $2 billion in monthly volume during the 2024 U.S. election, maintaining over $1 billion monthly even post-election. Competitor Kalshi counts Donald Trump Jr, son of the U.S. president, as a strategic adviser. Kalshi board member Brian Quintenz is President Donald Trump's nominee to chair the Commodity Futures Trading Commission. Prediction markets have gone mainstream.
Beyond entertainment value, these platforms create liquid markets that often outperform expert predictions. Prediction sites allow users to stake money on anything from economic data to the weather. Because their products are structured as peer-to-peer trades, providers are regulated not as betting groups but as derivatives platforms, allowing them to bypass sports gambling bans in 11 states.
However, an unlikely controversy involving Ukrainian President Volodymyr Zelenskyy's wardrobe choices has exposed potential vulnerabilities in the oracle systems that resolve these markets.
THE HAGUE, NETHERLANDS - JUNE 24: President Volodymyr Zelensky of Urkaine arrives at Huis ten Bosch ... More Palace for a dinner hosted by the King and Queen of The Netherlands during the NATO Summit 2025 on June 24, 2025 in The Hague, Netherlands. (Photo by Patrick) Getty Images
A Polymarket betting question asked whether Zelenskyy would wear a suit before July 2025. When the Ukrainian president appeared at a June NATO summit in what appeared to be formal attire, chaos ensued.
"Yes" holders argued the garment clearly constituted a suit, citing endorsements from prominent menswear expert Derek Guy and even the designer who created the outfit. Initially, one of Polymarket's associated Twitter accounts agreed, posting that Zelenskyy had indeed worn a suit. By July 7, the bets related to this controversy attracted $160 million worth of cryptocurrency.
But "No" holders disagreed, and the dispute moved to Univeral Market Access's Optimistic Oracle, which acts as a generalized escalation game between contracts that initiate a price request and UMA's dispute resolution system known as the Data Verification Mechanism . This system allows UMA token holders to stake tokens and vote on disputed outcomes.
Despite seemingly clear evidence, including confirmation from fashion experts and the garment's designer, the UMA oracle system appears poised to rule that Zelenskyy did not wear a suit, sparking outrage among "Yes" holders who stand to lose their wagers. Is Polymarket's Oracle Unsuitable?
THE HAGUE, NETHERLANDS - JUNE 24: Ukrainian President Volodymyr Zelensky arrives as NATO leaders and ... More spouses arrive for a dinner hosted by the King and Queen of the Netherlands during the 2025 NATO Summit on June 24, 2025 at Huis ten Bosch Palace in The Hague, Netherlands. This year's NATO summit, which brings together heads of state and government from across the military alliance, is being held in the Netherlands for the first time. Among other matters, members are to approve a new defense investment plan that raises the target for defense spending to 5% of GDP. (Photo by) Getty Images
The controversy highlights a fundamental vulnerability in decentralized prediction markets. UMA's oracle system is constructed with economic guarantees around the cost of corrupting the DVM to ensure it will cost more to corrupt the oracle (i.e., obtain 51% or more UMA tokens) than the amount someone could profit from corrupting the oracle.
However, UMA's relatively small market capitalization compared to Polymarket's trading volumes may create opportunities for economic attacks. Large UMA token holders, or "whales," could potentially manipulate dispute outcomes when the financial incentives align. The situation has sparked intense debate across social media, with some alleging coordinated efforts to influence the outcome, even rumors accusing competitors like Kalshi of foul play. Kalshi released a statement denying its representatives were in any way involved with trading on Polymarket, suggesting comments to the contrary are a prank unaffiliated with the company. Are The Suits Coming For Prediction Markets?
The timing couldn't be worse for Polymarket, which already faces scrutiny from multiple fronts. Seven states have sent cease and desist letters to Kalshi, which state regulators say did not comply with their laws. Kalshi has responded with lawsuits against the gaming regulators of Nevada, New Jersey and Maryland. While this refers to Kalshi, similar regulatory pressures affect the entire prediction market sector, including platforms like Polymarket.
Meanwhile, traditional gambling operators are taking notice. DraftKings and Flutter, which account for more than 80% of the U.S. sports betting market according to Barclays, are now ramping up their efforts to sway crypto-savvy gamblers, finally viewing prediction markets as a genuine competitive threat.
The sudden arrival of a new type of competitor may disrupt an industry that has grown rapidly since the Supreme Court overturned a near-nationwide ban on sports gambling in 2018. ESPN reported that traditional sports betting generated $13.7 billion in U.S. revenues last year. When Smart Contracts Do Not Suit The Occasion
The Zelenskyy suit controversy illustrates broader challenges facing decentralized prediction markets. UMA has successfully verified over 26,000 data assertions onchain, most of which come from prediction market platforms like Polymarket. Less than 2% of data assertions sent to UMA are disputed, according to blockchain data, yet high-stakes disputes can expose systemic vulnerabilities.
The question goes beyond whether Zelenskyy wore a suit. Can current oracle systems handle subjective determinations fairly and consistently as prediction markets scale? When millions of dollars ride on seemingly simple questions, even minor disputes can have outsized consequences.
For Polymarket and its competitors, the resolution of this particular market may be less important than the broader lesson: as prediction markets mature, their dispute resolution mechanisms must evolve beyond purely crypto-native solutions toward more robust systems that can handle both objective and subjective determinations at scale.
The Ukrainian president may or may not have worn a suit. Either way, prediction market users and operators are learning that profits come with growing pains, and not all of them can be solved with smart contracts alone.