South Korea Refers 18 Polymarket Users to Prosecutors in 12.7 Million USD Gambling Crackdown

South Korean police have referred 18 Polymarket users to prosecutors in an expanding illegal gambling investigation that has so far placed 26 people under scrutiny for wagering roughly 17.6 billion won, equivalent to about 12.7 million USD, on the prediction market platform.

The referral, first reported by Asia Economy, marks the most aggressive enforcement step yet in a case that began in June, when the Gangwon Provincial Police Agency opened the country’s first illegal gambling probe into local Polymarket users at the request of the National Police Agency. According to data submitted by the National Police Agency to the office of Democratic Party lawmaker Yoon Kun-young, 18 of the 26 individuals under investigation have now been handed over to prosecutors as of Tuesday.

The scale of the alleged activity is striking for a market that South Korean regulators insist does not legally exist in the country. The largest single wager identified by investigators totaled approximately 5.7 billion won, or about 4.1 million USD, staked by one user across Polymarket’s event-driven contracts.

## Blockchain analysis unmasked pseudonymous traders

Perhaps the most consequential detail for the broader crypto sector is how police identified the users in the first place. According to the report, investigators unmasked pseudonymous traders by analyzing publicly available blockchain transactions, linking onchain activity to real-world identities without any cooperation from the platform itself.

Polymarket operates on a noncustodial, peer-to-peer structure with automated settlement through smart contracts. It does not maintain a conventional list of users by their real names, a design choice that its defenders have long argued places it outside the reach of conventional platform regulation. The Korean investigation demonstrates that pseudonymity at the platform level does not necessarily translate into anonymity at the blockchain level, where persistent public records can be pieced together with offchain data.

Authorities reportedly concluded that Polymarket transactions constitute illegal gambling under South Korea’s Criminal Act because users stake assets on outcomes that cannot be predicted with certainty. The users under investigation pushed back, arguing that Polymarket should instead be treated as a crypto-based derivatives investment market rather than a gambling venue.

## Blockade followed August regulatory ruling

The criminal referrals build on a decision by South Korea’s media and communications review commission on Aug. 18 to block Polymarket inside the country. The commission determined that the prediction market provided an illegal gambling environment, citing its winner-takes-all structure as encouraging speculative gambling.

In its ruling, the commission pointed to Polymarket’s role in operating markets, setting trading rules, providing crypto deposits, withdrawals and settlement, and collecting transaction fees as evidence that the platform functions as a gambling service rather than a neutral technology provider.

Polymarket mounted a defense rooted in its technical architecture. The platform argued that it does not provide Korean-language services, does not support payments in Korean won, and that its noncustodial transactions and use of smart contracts mean it does not directly manage user funds. The commission rejected the argument outright, stating that technical characteristics do not exempt a service from the application of South Korean law.

Legal experts suggest the users face an uphill battle in court. Tae-Lim Kim, managing attorney at AXIS Law, told Asia Economy that the transactions could meet the statutory requirements for gambling. While describing them as prediction derivatives could frame the debate, he said that framing would be difficult to deploy as a direct defense in criminal proceedings, although the ability to trade contracts and exit positions before settlement could influence a court’s ultimate assessment.

## Global pressure on prediction markets intensifies

The South Korean crackdown is unfolding alongside mounting regulatory friction for prediction markets in other jurisdictions. In the United States, the Commodity Futures Trading Commission has been locked in disputes over how to interpret prediction market authority, including litigation that has exposed a circuit split over whether event contracts amount to regulated derivatives or impermissible gambling.

For Polymarket specifically, the Korean case establishes an uncomfortable precedent: jurisdictions that classify outcome-based contracts as gambling can pursue individual users, not just the platform, and can do so using the very blockchain transparency that crypto advocates celebrate as a core feature of the technology.

The 18 referred users now await prosecutorial decisions on whether formal indictments will follow. If prosecutors proceed and courts uphold the gambling interpretation, the case could set a binding template for how South Korea treats peer-to-peer prediction markets operating outside its licensing perimeter, and it signals to users elsewhere that betting through noncustodial infrastructure offers far less legal insulation than its architecture might suggest.

The investigation also complicates Polymarket’s global expansion ambitions. The platform has pushed into new markets and product lines over the past year, including leveraged perpetual-style contracts, even as regulators from Seoul to Washington debate whether its core product is a financial instrument or a bookmaker’s ledger. South Korea’s answer, delivered through criminal referrals rather than civil penalties, is now the harshest yet.