Polymarket Trust Crisis! Whales Manipulate Voting to Force Through "Approve" Result

Polymarket makes a “Yes” ruling on a $16 million market, which asked whether the Trump administration would declassify UFO files in 2025, but no documents were released. During after-hours trading, whales bought in large quantities at prices ranging from 99 cents to 99.9 cents, ultimately forcing the “Approve” result through UMA’s optimistic oracle with a token-weighted vote.

Arbitrage Logic and Governance Flaws of the 99-Cent Buy-in

(Source: Polymarket)

About 10 hours before the market settlement, a trader bought at a price of 0.998, and received a payout of 1.00 at settlement, resulting in a 0.2% return. For an order of $615,000, before fees, this could net approximately $1,230 in profit. The economic logic behind this near-parity purchase is simple: if the settlement risk is close to zero and the trade is recent, such a transaction is reasonable.

However, the key issue is whether the premise of “near-zero settlement risk” is valid. Where does this confidence come from? The answer lies in Polymarket and UMA’s oracle mechanism. The oracle relies on a two-hour challenge window, followed by token holder voting. The submission and publication period usually lasts about two days, with proposers and challengers staking around $750. Voting is token-weighted, and unruly voters may be penalized, concentrating decision-making power in the hands of liquidity-providing traders.

This structure explains why whales might rationally pay near-par prices if they believe a resolution is imminent or uncontested, even without public notice. More critically, if whales are large UMA token holders themselves, they can influence the outcome by voting to align with their positions. This “playing both sides” structural flaw is at the heart of this controversy.

If the proposer staked “YES” and no one met the bond requirement during the challenge window, the proposal defaults to passing and settles. If challenged, token holders vote instead of relying on trader balances. Under rules relying on subjective interpretation, oracle voters can judge technical satisfaction based on undocumented records or institutional announcements not widely reported. This mechanism might function in markets with clear objective facts but is highly susceptible to manipulation in markets based on subjective government actions.

Three Structural Flaws in UFO Market Manipulation

Low Bond Threshold: $750 bond can influence a $16 million market, leverage ratio of 21,333x

Token-Weighted Voting: Large UMA token holders can override trader consensus, disconnecting decision power from market participants

Subjective Interpretation Space: Vague standards like “credible reports” give oracle voters operational leeway

Decisions with No Evidence Cause Community Trust Collapse

(Source: Polymarket) Major public resources did not publish any declassification notices from the federal government at the same time. The U.S. National Archives’ UAP Resources Center lists research data and background guides but does not include a declassification announcement for December 2025. The only identifiable release is the Pentagon’s AARO published “Official UAP Images,” which include unresolved cases from 2022, added routinely over the past week as part of DoD’s release process.

According to market rules, these are not the results of a White House declassification order. Moreover, records show that “the object’s shape, performance characteristics, and behavior are not unusual, requiring no further analysis.” No “credible report consensus” was found, which is another rule for resolution. The gap between a “Yes” resolution and the lack of new public declassified documents shifts the story focus to oracle mechanisms and market structure rather than new disclosures.

After the “Approve” decision, the Polymarket comment section rapidly turned into fierce criticism. Many posts called the result a “scam,” mocking the “whale proof” or “proof of stake” models tied to UMA token voting. Users claimed whales bought near face value before finalization and that the token-weighted governance overshadowed trader consensus. Some urged submitting support tickets or even hiring lawyers to dispute the decision.

Others distinguished between price manipulation and procedural issues. One perspective is that price manipulation is “part of the game,” but “manipulating the outcome” through governance is unacceptable—reflecting distrust in dispute resolution procedures, not just trading dynamics. Chaos spread to related markets, with commentators questioning why “markets before 2026” could resolve but “before 2027” could not, arguing both should be similar.

Participants repeatedly asked when new “evidence” would be released, noting that the U.S. government hadn’t issued a concurrent press release. Critics argued that even if the “prophet” followed established procedures, the lack of transparency damages credibility. A few responses defended quick resolution, but these groups provided no new sources.

Regulatory Pressure and the Survival Crisis of Prediction Markets

Current events are part of ongoing governance conflicts. According to WIRED, voting on UMA tokens regarding Zelensky’s clothing market and Ukraine mineral trading market triggered strong community pushback, with Polymarket also considering one vote as a mistake. Yahoo Finance outlined that millions of dollars are being exploited through strategies by similar bots, leveraging pricing errors and structural advantages.

Macro factors heighten risks. Data from The Block shows that in November, the combined trading volume of Kalshi and Polymarket, two major retail platforms, approached 9.5 to 10 billion USD, setting a record high. In 2024, CNBC plans to integrate Kalshi’s forecast data into TV and digital media, incorporating these odds into broadcast quote systems, where data quality and settlement trustworthiness are critical.

Meanwhile, state regulators are testing boundaries. Connecticut’s Department of Consumer Protection issued cease-and-desist orders to prediction platforms operating in the state, while Massachusetts’ Attorney General filed lawsuits attempting to prevent the enforcement of Kalshi’s sports contracts. These measures create a consumer protection framework for integrity disputes, impacting reputation and legal risk. The controversy over the UFO market could become an occasion for regulators to tighten oversight.