Polymarket hit with New York lawsuit over Strategy Bitcoin market

Polymarket has been sued in New York after two users alleged the prediction platform wrongly denied payouts on a Strategy Bitcoin market despite the company disclosing a Bitcoin sale in an SEC filing.

According to a complaint filed in the Supreme Court of the State of New York on July 3, plaintiffs William Wood and Thomas Bush alleged that Polymarket refused to redeem winning “Yes” shares tied to a market asking whether Strategy, formerly MicroStrategy, would sell any of its Bitcoin by May 31, 2026. The lawsuit names Adventure One QSS Inc., Blockratize Inc., Polymarket founder Shayne Coplan, Chief Marketing Officer Matthew Modabber, and unnamed defendants.

The plaintiffs claimed Strategy’s own Form 8-K filing with the U.S. Securities and Exchange Commission disclosed the sale of 32 Bitcoin during the reporting period ending May 31, 2026, which they argue satisfied the market’s original binary question. According to the filing, the SEC disclosure was identified as the market’s primary resolution source, leaving no ambiguity over the outcome.

Plaintiffs allege rules were changed after the outcome

Instead of paying winning traders, the complaint alleged Polymarket resolved the market as “No” after posting additional clarification language that effectively changed the question from whether Strategy sold Bitcoin by the deadline to whether the sale had been publicly confirmed by that date.

The lawsuit argued the platform used the timing of the SEC disclosure rather than the timing of the underlying transaction to settle the market. According to the plaintiffs, the market concerned the occurrence of the sale itself, while the SEC filing merely served as evidence of that event.

Court filings further alleged the dispute was not based on an unclear or subjective outcome but on what the plaintiffs described as an objective corporate event documented by Strategy’s own regulatory filing. They argued that allowing resolution standards to change after the event undermined Polymarket’s advertised promise of fixed, rules-based markets.

The complaint seeks damages for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, money had and received, and alleged deceptive business practices and false advertising under New York General Business Law. The plaintiffs are also seeking attorneys’ fees, interest, injunctive relief and statutory damages, with the final amount to be determined at trial.

Complaint challenges Polymarket’s public representations

Elsewhere in the filing, the plaintiffs pointed to Polymarket’s promotional statements describing it as the world’s largest prediction market where markets “seek truth,” prices represent probabilities, and users can profit from accurate knowledge. According to the complaint, those representations become misleading if market rules or resolution standards can be altered after an outcome is already known.

The lawsuit also argued that although Polymarket uses the UMA Optimistic Oracle to settle contracts, the defendants retained control over drafting market rules, issuing clarifications, managing market pages, and determining how questions were framed before being submitted for oracle resolution.

Individual claims were also made against Coplan and Modabber. The complaint alleged Coplan exercised ultimate authority over the company’s operations and the disputed market resolution, while Modabber was named for his alleged role in Polymarket’s marketing and advertising activities. These allegations have not been proven in court.

The lawsuit comes as Polymarket faces additional regulatory scrutiny. Bloomberg recently reported that the U.S. Commodity Futures Trading Commission is conducting an investigation into multiple parts of the company’s business, including its social media operations. 

One of the investigations is centered around allegations that the prediction market reportedly hired content creators to publish promotional videos showing simulated trades and fabricated winnings, allegations that Polymarket has not publicly addressed.