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 Facing Regulatory Issues,” 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

These tools primarily address the inconvenience of operating the native Polymarket interface and its limited functionality. They offer 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 expert strategies via the copy trading feature.

2. Data Analysis Tools

These tools aim to solve the problem of market information opacity. 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 large 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 fast news aggregators customized for Polymarket, designed to address delays in news acquisition 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 displayed alongside market data; and more accurate information—AI automatically filters noise and highlights important signals, allowing users to focus only on the most valuable information.

Three common compliance concerns for entrepreneurs

From the perspective of entrepreneurs, 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 investment during funding rounds.

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 operating 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 facilitate user bets or platform fee collection. Should they be considered 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 Chinese entrepreneurs developing such third-party tools are automatically legal?

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 Public Security Bureau, 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 with fund settlement pose legal risks. The three types of tools mentioned above serve different functions but share the goal of making it easier for users to use the Polymarket platform and to compensate for its native interface shortcomings. Objectively, these tools provide technical support, traffic, member recruitment, and customer acquisition services for Polymarket. As such, developing derivative third-party tools for such platforms involves gambling-related legal risks.

Second, if 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 according to principles of jurisdiction and territoriality, whether the entrepreneur is inside or outside China, they may still face criminal legal risks under Chinese law. Depending on the nature of their work and behavior, they could be charged with crimes such as establishing a casino, illegal business operation, or, in less severe cases, crimes like illegal use of information networks or aiding information network crimes.

Legal risk tips for entrepreneurs

Entrepreneurs who cross legal boundaries often face the greatest regret. Many of them have excellent backgrounds, including overseas study experience, and are Chinese developers living abroad.

In their understanding and environment, Polymarket itself has obtained a compliance license and is considered a legal operation 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 aspiring to deepen their involvement in the Web3 space, it is recommended to thoroughly understand domestic laws and market policies, evaluate potential risks rationally, and make cautious decisions.