Market Integrity & Risk Disclosure

Overview & Core Purpose

This Market Integrity, Oracle Settlement & Fair Trading Policy (this "Policy") outlines the technical standards, economic rules, resolution protocols, and trading conduct guidelines governing the prediction markets displayed on the PolyYard decentralized graphical user interface and order relayer (the "Interface" or "Platform").

PolyYard is dedicated to fostering transparent, fair, and tamper-resistant prediction markets. PolyYard is a non-custodial software interface and relayer that surfaces event contracts settling on public Polygon PoS smart contracts (the Gnosis Conditional Tokens Framework, or "CTF") and matched via Polymarket's Central Limit Order Book ("CLOB").

This Policy details the mechanics of price discovery, deterministic resolution frameworks, decentralized oracle governance, edge-case invalidation rules, and strictly prohibited market manipulation activities.

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1. Market Lifecycle & Conditional Token Economics

All prediction markets accessible via the Interface are structured on the Gnosis Conditional Tokens Framework (ERC-1155), operating under fixed mathematical constraints:

1. Collateralization: $1.00 USDC Deposit → Mints 1 YES + 1 NO Share

2. Secondary Trading: Shares trade between $0.00 and $1.00 on Polymarket (Reflecting aggregate market-implied probability: 65¢ = 65% Probability)

3. Oracle Resolution: UMA Optimistic Oracle verifies real-world outcome

4. Redemption:

• Winning Outcome Shares → Redeemable for exactly $1.00 USDC per share
• Losing Outcome Shares → Expire completely worthless ($0.00 USDC)

1. Collateral Standard: All markets are 100% collateralized by Polygon native USD Coin (USDC, 6 decimals). For every $1.00 USDC deposited into the CTF contract, exactly one complete set of outcome shares (e.g., 1 "YES" and 1 "NO") is generated.

2. Implied Probability Pricing: Prices fluctuate strictly between $0.00 and $1.00 per share. The price of an outcome share directly represents the market's consensus probability of that outcome occurring (e.g., a "YES" token trading at $0.72 implies a 72% likelihood of resolution to "YES").

3. Zero-Sum Payout Settlement: Upon definitive oracle resolution, holders of the winning outcome token can redeem each share for exactly $1.00 USDC directly from the CTF contract. Losing outcome tokens automatically become worthless ($0.00 USDC).

2. Decentralized Oracle Framework & Settlement Pipeline

PolyYard does not resolve markets, run proprietary oracle nodes, or determine event outcomes. All markets displayed on the Interface settle via the UMA Optimistic Oracle v3 (OOv3), a decentralized, economically bonded resolution protocol.

Resolution Flow:

1. Real-World Event Occurs
2. Outcome Assertion — Asserter posts economic bond in USDC/UMA
3. Challenge Window (OOv3) — 2-Hour Liveness Period: Anyone can dispute
4. If No Dispute → Final On-Chain Payout — Gnosis CTF unlocks $1.00 USDC per winning share
5. If Disputed → UMA DVM Token Voting — Escalation to global tokenholder vote → Final On-Chain Payout

2.1. Primary & Fallback Resolution Sources

Each market includes explicit, objective resolution criteria established prior to market launch.

• Objective Data Feeds: Where possible, markets specify primary, verifiable resolution sources (e.g., official government election portals, central bank filings, Associated Press, official sports league APIs, or on-chain price feeds).
• Consensus Reporting: If a primary source is compromised, unavailable, or ambiguous, secondary credible reporting outlets and official public statements are evaluated according to the market's initial parameters.

2.2. The Assertion & Dispute Lifecycle

1. Assertion: Following the occurrence of an event, an asserter submits the proposed outcome to the UMA Optimistic Oracle along with an economic bond (in USDC or UMA tokens).
2. Liveness / Challenge Window: A predefined challenge period (typically 2 hours) begins immediately. Any participant who believes the assertion contradicts the market criteria may post a matching counter-bond to dispute the claim.
3. Automatic Settlement: If no dispute is raised before the challenge window closes, the assertion is finalized as truth and the smart contract permanently unlocks redemptions for the verified outcome.
4. Escalation to Data Verification Mechanism (DVM): If disputed, the assertion escalates to UMA's global decentralized tokenholder community. UMA tokenholders vote independently based on the verbatim market rules. The voter majority determination is final and binding on-chain.

3. Edge Cases, Ambiguities & Invalidation Rules

To protect market fairness in complex real-world scenarios, standard protocols are established for edge cases:

3.1. Market Invalidation (50-50 Split Settlement)

A market may be resolved as Invalid / Void under specific circumstances, including:

• The event is permanently canceled, postponed beyond the allowable expiry threshold, or rendered impossible to determine by any credible source;
• The phrasing or resolution criteria of the market contained an irreconcilable logical contradiction or ambiguous drafting error;
• The primary and fallback resolution sources ceased operations without any authoritative alternative.

When a market resolves as Invalid, the Gnosis CTF contract unlocks collateral equally across all outcome sets, allowing each "YES" and "NO" share to redeem for exactly $0.50 USDC.

3.2. Postponements & Rescheduled Events

• Sports & Entertainment: If an event is postponed, the market remains active until the rescheduled date, provided it occurs before the market's longstop expiration timestamp. If postponed indefinitely or beyond the longstop date, the market resolves as Invalid.
• Elections & Governance: Elections and legislative votes settle upon official certification by the competent governmental body, regardless of administrative delays or recounts.

4. Prohibited Market Manipulation & Fair Trading Rules

To maintain high standards of market integrity, all users of the Interface agree to refrain from manipulative or deceptive practices. The following activities are strictly prohibited:

• Wash Trading & Self-Matching: Executing simultaneous buy and sell orders from the same wallet (or colluding wallets) to create a false impression of volume or market activity.
• Spoofing & Layering: Submitting large orders with the intent to cancel before execution to create fictitious bid/ask depth and deceive other participants.
• Oracle Griefing & Sybil Disputes: Submitting baseless, bad-faith disputes to the UMA Optimistic Oracle to intentionally delay market settlement or exploit voting mechanisms.
• Front-Running & Relayer Exploits: Attempting to exploit transaction ordering, backend relayer proxies, or private mempool features to unfairly extract value from market participants.
• Insider Exploitation & Tampering: Engaging in prediction trading if you have direct operational control over the real-world outcome (e.g., event organizers, referees, or ballot certifiers).

PolyYard reserves the right to restrict or block Interface access (via IP geofencing and client-side filtering) for any wallet address associated with verified market manipulation, wash trading, or oracle griefing.

5. Zero Operator Discretion & Non-Custodial Disclaimers

PolyYard's architecture enforces strict mathematical and operational neutrality:

1. No Market Intervention: The Operator does not have the technical capability, administrative keys, or legal authority to:

• Pause, reverse, or cancel executed on-chain orders;
• Alter the outcome determined by the UMA Optimistic Oracle;
• Freeze, seize, or redirect user funds or outcome tokens;
• Force-settle or modify collateral balances inside the Gnosis CTF contracts.

2. Independent Participation: The Operator does not trade on PolyYard markets, does not act as a house counterparty, and does not operate automated algorithmic trading desks on the Platform.

3. No Financial, Investment, or Legal Advice: Information, charts, probabilities, and market descriptions displayed on the Interface are for informational and navigational purposes only and do not constitute financial advice, an endorsement, or a solicitation of any kind.

6. Public Transparency & On-Chain Auditability

All activities facilitated through PolyYard are publicly auditable and transparent:

• Blockchain Explorer Verification: Every order fill, token mint, and payout claim can be verified on the Polygon PoS public ledger via PolygonScan.
• Oracle Governance Transparency: All assertions, challenge bonds, and UMA voting records are publicly accessible and trackable on the UMA Oracle Explorer.
• Open-Source Relayer Code: Smart contracts and frontend routing logic are fully open-source and subject to public inspection and security audit verification.

7. Community Reporting & Integrity Inquiries

If you detect suspicious trading activity, ambiguous market criteria, or potential oracle tampering, you are encouraged to report it to the decentralized governance community:

• UMA Oracle Disputes: Submit counter-assertions directly through the UMA Oracle Portal during the active challenge period.
• PolyYard Community Desk: Report technical interface bugs, display anomalies, or API sync errors via our official community communication channels and GitHub repository.