Polymarket protocol V2 replaces the 2019 framework behind its market

Polymarket launches limited market testing based on Protocol V2 contracts

Polymarket has begun running a limited set of markets on its platform that use the new Protocol V2 contracts. According to preliminary plans, the newly created market will start using this new agreement from November 2. Existing markets will remain on legacy contracts and will not be migrated immediately.

This restructuring aims to replace the 2019 framework with a new architecture that includes a single position contract and a modular oracle layer. Polymarket announced Protocol V2 on October 5, a complete rewrite of the smart contracts that support the world's largest crypto prediction market platform, involving the storage and management of user positions, collateral and market results.

Transition Schedule and Canary Testing

Protocol, said that there are already a small number of markets operating as canaries. The so-called "canary" market refers to a small real-time market used to expose potential failures before widespread release. Testing will last until October 30. According to The Block, if no major accidents occur during this period, the newly created market will tentatively launch Protocol V2 starting from November 2.

This change is crucial because the platform's monthly transaction volume fluctuates between US$4.6 billion and US$11.3 billion this year, and the original infrastructure was not designed for such a huge load.

From the 2019 Gnosis Toolkit to Refactoring from scratch

Polymarket has long been running on the Conditional Tokens Framework (CTF) released by Gnosis in 2019. This generic toolkit initially handled simple binary questions (yes/no) well. However, as companies launch more complex products, including negative risk markets (where only one outcome wins in multiple outcome events), each new product needs to add its own adapters, packaging assets, and exchange contracts to its original base. Alex pointed out that current contracts were essentially never designed to cope with the scale of the platform's subsequent development.

In his words, Protocol V2 rebuilds the system from "position tokens." The initial version supports four market structures: Binary, Atomic Neg-risk, Incremental Neg-risk, and Combinatorial.

Core Architecture Upgrade: ERC-1155 and Unified Routing

The core of this design is a single ERC-1155 contract. This is a token standard that allows one contract to manage multiple different token types simultaneously. Regardless of the type of market on the platform, all positions will exist in the contract.

Polymarket has also changed the way positions are marked: the V2 position ID encodes the market type, market and outcome information. As a result, the protocol can read what the token represents directly from the ID without having to query multiple other contracts. Around the contract are a unified exchange, public routers, and pUSD as shared collateral.

pUSD is not a new concept. Polymarket launched pUSD along with the upgraded exchange on April 28. According to its documentation, pUSD is an ERC-20 token based on the Polygon network, supported by the USDC on a 1:1 ratio, and this support is enforced through smart contracts. Users 'deposit, transaction and withdrawal operations remain unchanged.

Roadmap and future features

• April 28 (completed): Deploy CTF Exchange V2 and pUSD collateral on Polygon.
• October 5 (in progress): announced Protocol V2, the Canary Market to operate in a production environment.
• October 30 (planned): The Canary testing period ends.
• November 2 (tentative): Newly created markets begin to use Protocol V2; existing markets remain on older contracts.

UMA and Chainlink will become interchangeable oracle providers, opening the door to a consumer price index (CPI)-style market. Every prediction market relies on oracle machines-mechanisms that provide real-world results for settlement. Protocol V2 introduces Oracle Aggregator, separating the market from any single solution system. At the time of release, UMA and Chainlink were connected and were designed to allow the addition of other providers.

This separation makes it possible to develop subsequent products. Polymarket said the architecture supports scalar resolution, where the market can settle values within a certain range (such as December's CPI reading), rather than a simple "yes" or "no". Directional collateral return functions are also under development. However, these features were not yet activated at the time of release. The same goes for cross-chain functionality: V2 includes bridging locations, collateral and structures for settlement beyond Polygon's scope, but Polymarket has not yet turned on this feature.

Performance Benchmarks and Data Infrastructure

Although Gas fees fell by 6% to 37% in April, there is currently no benchmark for Protocol V2 itself. The closest reference is an open source document updated by the exchange in April, which compares Gas usage (network fees paid to execute a transaction) between old code and code matching new orders.

The following is data from Polymarket's own snapshot testing (Signed using a standard wallet and no fees), reflecting the performance of early CTF Exchange V2 code, rather than the new protocol announced this week:

At the same time, data infrastructure is also changing. Polymarket is releasing Data API V2, which is based on its self-developed on-chain indexer and covers transactions, portfolios, open interest, holders, price history and settlement results. The documentation shows that public routing does not require an API key. A Polymarket developer reported that the internal indexer saw on-chain events about 14 blocks (about 28 seconds) earlier than the previous setting.

Audit and Security

Six agencies, Cantina, Certora, Quantstamp, Sigma Prime, Zellic and Pashov, reportedly audited the new contract. Certora also performs formal verification, a mathematical method for checking whether code meets defined attributes, rather than relying solely on test cases. Polymarket has set up a vulnerability bounty of up to $5 million to reward white-hat hackers who discover critical vulnerabilities.

Market background and regulatory environment

Polymarket chose to replace the core contract at this time, just after trading volume dropped. According to DeFi Rate data, monthly transaction volume peaked at about $11.3 billion in June and then fell month by month: $8.6 billion in July,$5 billion in August, and $4.6 billion in September. As of October 2, the value of open interest was approximately $329.9 million. This means replacing during calm times when capital impact is small can reduce the risk of failure in the "canary" market.

The ownership structure has also changed. Intercontinental Exchange (ICE), owner of the New York Stock Exchange, invested $1 billion in October 2025 and completed an additional $600 million in cash investment in March 2026. As early as January 2022, the U.S. Commodity Futures Trading Commission (CFTC) fined Polymarket $1.4 million for providing unregistered event contracts. In July 2025, the company acquired QCEX, a trading and clearing house licensed by the CFTC, for US$112 million, and regulators now list Polymarket US as a designated contract market.

Actual impact on users

Old positions remain unchanged: Protocol V2 will be used only in markets created after November 2. Open positions in existing markets will remain on older contracts until settlement is completed in those markets, so the two systems will run in parallel for several months. Traders should not see a difference in depositing or withdrawing funds. However, developers and market makers will face greater adjustments as position IDs, routing and data endpoints have all changed.

Competitors are also building simultaneously. The CFTC's designated contract market list now includes ProphetX, Water Street Labs and Xchange Alpha, alongside Kalshi and Polymarket US, and Robinhood also distributes event contracts to its brokerage clients.

Despite the rapid development, New York State and the UK Financial Conduct Authority (FCA) are still debating which events can be traded. New York State has predicted market operators about sports contract challenges as gambling; a review submitted to the CFTC this year mentioned six newly created Polymarket accounts that allegedly made approximately $1.2 million in profits on the timing of the U.S. strike against Iran. In the UK, the FCA said this week it was in contact with Polymarket and Kalshi to review how such products would comply with its rules on retail binary options restrictions.