Risks faced by Chinese developers developing third-party tools for Polymarket

Polymarket is currently the world’s largest prediction market platform. According to publicly available data, its global user base has exceeded 30 million, with monthly trading volume maintaining around 1 billion USD as of early 2026. The platform’s prediction scope is extremely broad, covering fields such as politics, sports, macroeconomics, finance, and cryptocurrency prices.

As the Polymarket ecosystem continues to expand, a batch of third-party tools has emerged. These tools are developed by entrepreneurs to help platform users participate in prediction market trading more efficiently and to address the deficiencies in the native interface in terms of functionality and user experience.

However, from the perspective of Chinese law, the situation requires cautious examination. As Lawyer Shao pointed out in a previous article titled “V神, Trump, and the Crypto Prediction Market Platform They Both Shared, What Regulatory Issues Does It Face?”, crypto prediction market platforms essentially offer products similar to binary options.

Therefore, if Chinese entrepreneurs develop related tools around the Polymarket ecosystem, could they face legal risks domestically?

What are the three types of third-party tools in the Polymarket ecosystem?

According to information compiled by the Changan I Biteye content team, third-party tools emerging within the Polymarket ecosystem can roughly be divided into three categories: trading terminals, data analysis tools, and news trading tools. The tools developed by entrepreneurs mainly focus on 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

This type of tool mainly addresses issues such as inconvenient operation and limited functions of the native Polymarket interface. These tools provide interfaces similar to professional cryptocurrency exchanges, with core features including market overview, bulk order placement, stop-loss and take-profit settings, one-click copy trading, AI-assisted analysis, and cross-platform arbitrage.

For users, the benefits include faster operation, stronger execution, and lower barriers—users can perform bulk operations, set stop-loss and take-profit to control risks, and even beginners can copy strategies of experts through the copy trading feature.

2. Data Analysis Tools

This type of tool aims to solve the problem of opaque market information. They analyze publicly available on-chain data from Polymarket to build detailed profiles of each trading address. Core functions include trader rankings, wallet deep analysis (profit/loss, preferences), and identification of insider signals (such as marking newly created wallets with heavy holdings).

With these tools, users can observe the movements of large funds and consistently profitable “smart money,” identify addresses that may possess insider information, and thus avoid blindly following the crowd.

3. News Trading Tools

These are custom rapid news aggregators designed specifically for Polymarket, addressing issues of delayed news and disconnection from market movements. They scan thousands of sources such as X (formerly Twitter), news websites, and official press releases 24/7, and use AI to filter and score the information.

The advantages for users include faster speed—major news can be pushed within seconds of occurrence; more efficient decision-making—news and market data are displayed on the same screen; and more accurate information—AI automatically filters noise and highlights important signals, allowing users to focus only on the most valuable information.

Three common legal concerns for entrepreneurs

From an entrepreneurial perspective, these third-party tools have their significance and value. Their core goal is to help users track “smart money” and discover insider signals, enabling faster and better decision-making.

Therefore, these products have considerable market potential and are more likely to achieve higher valuations and attract investments during fundraising.

However, for Chinese entrepreneurs, while recognizing the development potential of such businesses, there is often an underlying sense of unease—if they engage in this type of activity, could they face legal risks domestically? Their concerns mainly focus on the following aspects:

First, Polymarket has obtained a “Designated Contract Market” (DCM) license from the U.S. Commodity Futures Trading Commission (CFTC), transforming 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 licensed platform?

Second, the three types of tools—providing trading terminals, aggregating accurate news, and conducting pure data analysis—do not involve handling funds, nor do they allow users to place bets or extract platform fees. Should they be considered merely neutral software tools?

Third, these products are mainly targeted at overseas users, essentially making them products aimed at foreign markets. Does this mean they do not involve violations of Chinese law?

Lawyer Shao’s Analysis

Especially for entrepreneurs living abroad for many years and unfamiliar with Chinese law, such misunderstandings are understandable, but they are also the most dangerous.

Below are answers to two core questions:

First, does overseas compliance mean that it is legal for Chinese entrepreneurs to develop such third-party tools?

Although Polymarket has obtained compliance licenses overseas, from the perspective of Chinese law, such prediction market platforms clearly have gambling characteristics, which is undisputed. According to the “Opinions on Several Issues Concerning the Handling of Cross-border Gambling Crimes” 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, or membership development services for gambling websites constitutes conspiracy to establish a casino crime.

Therefore, not only actions involving user funds or assisting the platform in fund settlement pose legal risks. The three types of tools mentioned above serve different functions but share the purpose of making it easier for users to utilize Polymarket and to address its interface limitations. Objectively, these tools provide technical support, attract traffic, develop memberships, and recruit gamblers for Polymarket. As such, developing derivative third-party tools for such platforms carries gambling-related legal risks.

Second, since these tools and products are aimed at overseas users, do they avoid Chinese legal risks?

If such products can be accessed domestically via VPN or if no measures are taken to block domestic users, then under the principles of personal jurisdiction and territorial jurisdiction, regardless of whether the entrepreneur is inside or outside China, they may still face criminal legal risks in China. Depending on the nature of their work and behavior, they could be involved in crimes such as establishing a casino, illegal business operations, or, in less severe cases, crimes of illegally utilizing information networks or assisting in information network crimes.

Legal risk tips for entrepreneurs

Crossing legal red lines is often the most regrettable outcome for entrepreneurs. Many of them have excellent backgrounds and overseas study experience, being Chinese developers living abroad for a long time.

In their understanding and environment, Polymarket itself has obtained a compliance license and is considered a legitimate platform, and there are many similar third-party tools on the market. Under these circumstances, they find it difficult to recognize the risks of their own actions.

Therefore, for entrepreneurs who aspire to deepen their involvement in the Web3 field, it is recommended to thoroughly understand domestic laws and market policies, evaluate potential risks rationally, and make cautious decisions.