ICE invests 2 billion, valuation of 8 billion USD. How does Polymarket justify this valuation?

Source: Galaxy; Compilation: Golden Finance

Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, announced on Tuesday that it has agreed to invest up to $2 billion in Polymarket. According to Messari, this deal is the seventh-largest equity investment by a cryptocurrency company and the largest private equity investment by a traditional Wall Street firm. The transaction values this blockchain-based prediction market platform at $8 billion. This is nearly seven times the valuation of Polymarket’s latest funding round this year and 22 times higher than the valuation before the November 2024 election funding round.

In addition to this massive investment, ICE also stated plans to “become the global distributor of Polymarket’s event-driven data, providing clients with sentiment indicators related to market topics.” ICE mentioned that the two companies will also collaborate on tokenization projects. Meanwhile, Polymarket founder and CEO Shayne Coplan hinted that they might be preparing to launch the POLY token, and MetaMask announced a plan to integrate Polymarket into its wallet (as well as perpetual futures trading).

Galaxy’s Perspective:

The investment and recognition from iconic Wall Street institutions are part of the turning point for Polymarket and its 27-year-old founder Shayne Coplan.

Bloomberg described Coplan as the world’s youngest self-made billionaire. About a year ago, during the final days of the Biden administration, the FBI raided Coplan’s residence to investigate whether Polymarket allowed U.S. users to access the platform, potentially violating a previous settlement agreement with the Commodity Futures Trading Commission (CFTC).

However, during the Trump administration, the federal government dropped the investigation, and Polymarket acquired the CFTC-licensed exchange QCX, paving the way for Polymarket’s return to the U.S. market. Coplan is no longer an outsider; he has been invited to industry roundtables at the White House and joint events with the SEC and CFTC. The company of former President Donald Trump participated in early funding rounds, and he joined Polymarket as an advisor.

Beyond the astonishing valuation and Coplan’s comeback, we are curious about how ICE plans to handle Polymarket’s data. This information is already publicly available on-chain, with odds published on Polymarket’s website and (obviously) updated in real-time. On the other hand, market data services are ICE’s main business line, generating approximately $1.84 billion last year, about 15% of the company’s total revenue.

ICE may believe it can package Polymarket’s data into a value-added service for TradFi clients, perhaps transmitting it instantly in the formats these institutions are accustomed to using on their trading screens. If so, and if ICE charges for this service and shares revenue with Polymarket, it could help address the long-standing challenge faced by the latter (which does not charge trading commissions): finding a sustainable revenue model.

From a macro perspective, some might argue that the true product of prediction markets is not the bets themselves but the information signals they generate. If a platform can find a way to monetize these signals, it could potentially profit without charging commissions. Prediction markets aggregate dispersed information into price signals. Each contract price can be interpreted as the implied probability of a certain outcome. Over time, many markets create a probabilistic forecast dataset—essentially a continuously updated collective expectation model. From an economic standpoint, bets are inputs, not outputs. The valuable output is the information generated by these betting interactions. From this perspective, it’s not hard to imagine that Polymarket’s hidden advantage lies in its potential to capture and standardize this data at scale, creating high-frequency feedback on real-world sentiment and forecasts.

Traditional exchanges monetize trading activity through fees, but these fees introduce friction, distorting price formation. Participants adjust their buy and sell prices based on costs, causing market prices to deviate slightly from the “true” collective probability. If Polymarket can find a way to monetize the data layer, it can continue to avoid this friction. A zero-commission structure should lead to more efficient markets, resulting in cleaner, higher-quality information products. The improved data quality is precisely because users do not have to pay to provide data.

Therefore, we can envision Polymarket’s positioning shifting from a betting platform to an information infrastructure provider. The market is its mechanism for crowdsourcing predictions; the business is to commercialize these forecasts. Natural clients for such products may include financial institutions, hedge funds, news organizations, and AI developers seeking real-time market-based indicators of future events.

Meanwhile, the POLY token that Coplan hinted at (depending on its design) might address another major challenge Polymarket faces: maintaining trust in its smart contract solutions. Over a year ago, tech news site The Information cited anonymous sources saying that Polymarket was considering issuing its own token “so users can verify the outcomes of real-world events.” For those who understand the implications, this sounds like a warning to the UMA protocol. UMA is Polymarket’s oracle service used to resolve market issues and settle disputes through community voting. A common complaint about UMA is that large token holders could collude to resolve market issues in a way that benefits themselves regardless of the actual outcome.

This year, Polymarket has taken steps to reduce reliance on UMA, utilizing Chainlink to address market issues related to asset price volatility. When announcing the collaboration, both parties stated they are “exploring various ways to expand Chainlink’s application, addressing prediction market issues involving more subjective questions, reducing reliance on social voting mechanisms, and further lowering resolution risks.” Therefore, Polymarket may still be considering POLY as part of its resolution solution.

Finally, we are curious about ICE’s joint efforts with Polymarket to tokenize assets. As Coplan briefly mentioned in an interview on the TBPN podcast, Polymarket has extensive experience in this area—every “Yes” or “No” stock traded on the platform is a blockchain token linked to real-world outcomes. It seems not difficult to seek their help in tokenizing real-world assets listed on ICE exchanges.