South Korean investigative authorities have officially referred 18 Polymarket users to the prosecution following a detailed probe into $12.7 million worth of activity on the decentralized prediction platform. The move is a direct response to individuals allegedly bypassing the country's strict National Gambling Act and the Capital Markets Act by participating in offshore, unauthorized speculative betting. This enforcement action marks a significant escalation in how South Korea regulates decentralized finance (DeFi) participants who engage in high-stakes event wagering.
The investigation focused on a group of 'power users' who collectively wagered millions on global events, ranging from political elections to economic indicators. While Polymarket operates globally as a decentralized protocol, South Korean law strictly mandates that any platform offering gambling-like services must be state-authorized and comply with rigorous consumer protection standards. The $12.7 million figure highlighted by investigators suggests that the scale of participation by domestic residents had reached a threshold that regulators could no longer ignore.
This regulatory pressure is part of a broader 2026 initiative by South Korea’s Financial Services Commission (FSC) to close loopholes used by citizens to access offshore crypto-based services. Historically, South Korea has maintained some of the world's most restrictive gambling laws, and the government is now applying these legacy frameworks to modern blockchain applications. By targeting the users rather than just the protocol, the authorities are signaling that individual participation in 'unlicensed' DeFi activities carries personal legal risk.
For the broader crypto market, this development suggests a tightening environment for prediction markets in the Asia-Pacific region. Investors and users should watch for potential IP blocking or mandatory KYC (Know Your Customer) requirements that decentralized platforms might be forced to implement to avoid further legal friction with the South Korean government. If other jurisdictions adopt this model of prosecuting individual high-volume users, liquidity on decentralized betting platforms could see a notable decline in the coming months.