[lxgr]

> pay out to neither side and pocket all funds at stake

That's also not possible, as far as I understand. If the smart contracts are worth their salt, the only possible outcomes per binary option is to pay out in full to either "yes" or to "no" holders, not to any other unrelated party, including Polymarket.

The real risk is somebody subverting a sufficiently large proportion of (anonymous, stake-based) arbiters on UMA, which is the on-chain entity that actually arbitrates outcomes and as such releases funds to one side or the other. Then, somebody could buy the "wrong" outcome tokens for cheap and flip the payout their way.

No idea how feasible that is and which game-theoretic protections UMA/Polymarket have against that possibility, but I don't think we've seen a smoking gun for that yet.

[quamserena]

This has happened multiple times [0]. You shouldn't put your money into Polymarket

[0] https://old.reddit.com/r/CryptoCurrency/comments/1jki1lj/pol...

[morshu9001]

Maybe I don't understand it enough, but I don't see how it's hard at all to manipulate this with a lot of money. Buy a lot of the wrong resolution, and all the other individuals will be too afraid to buy the right one.