Polymarket Security Incident Alert: How a Third-Party Certification Vulnerability Can Empty User Wallets

Decentralized prediction market platform Polymarket confirmed on December 25th that due to a security vulnerability in a third-party identity verification service provider, some user funds were stolen, and account balances were wiped out. The affected users mainly registered through Magic Labs, a service that allows users to log in with an email address and automatically create a non-custodial Ethereum wallet.

This vulnerability bypassed standard security measures such as two-factor authentication, sparking widespread concern in the market about the security of third-party integrations on crypto platforms.

01 Event Overview: Asset Risks Exposed by Third-Party Vulnerability

The asset theft experienced by Polymarket users did not stem from a core smart contract vulnerability but was caused by a security flaw introduced by its reliance on a third-party identity verification service provider.

The platform stated on its official Discord channel: “We recently discovered and addressed a security issue affecting a small number of users, which was caused by a vulnerability introduced by a third-party identity verification provider.”

Although the platform claims the issue has been fixed and there is no ongoing risk, the specific number of affected users and the amount lost have not been disclosed, creating a vacuum of information that has led the community to widely worry about the true scale and severity of the incident.

02 Attack Process: Restoring Typical User Victim Cases

According to user reports on social media, this security incident exhibits clear pattern characteristics.

A Reddit user detailed their experience: “This morning I woke up to three login attempt notifications for Polymarket — my device was not compromised, Google didn’t find any suspicious activity, and all other services are normal.”

However, when he logged into Polymarket to check, he found all trades had been closed, and the account balance was only $0.01, meaning the wallet was nearly emptied.

Another user reported a similar experience: despite not clicking any suspicious links and enabling two-factor authentication on email, they still couldn’t prevent the attacker from emptying their funds after receiving three login attempt notifications.

03 Victim Group: Magic Labs Registered Users Become the Main Target

A common point among the victims of this security incident is that most registered their Polymarket accounts via Magic Labs.

Magic Labs is a third-party login service designed for crypto beginners, allowing users to log in with just an email address, with the system automatically generating a non-custodial Ethereum wallet in the background. This design greatly lowers the entry barrier into the crypto world but also introduces new attack surfaces.

It appears that attackers have found ways to bypass multiple verification mechanisms, not through traditional phishing or malware attacks on user devices. This has raised serious concerns about third-party identity verification services as potential single points of failure.

04 Platform Response: Vague Information Raises More Doubts

Polymarket’s response to this incident shows a clear tendency of information withholding, which has led to more questions rather than answers.

First, the platform only vaguely mentioned that “a small number of users” were affected, without providing specific numbers or proportions. Second, it did not disclose the total amount stolen, preventing the community from assessing the severity of the event. Third, Polymarket did not explicitly name the involved third-party service provider, although the community widely suspects it to be Magic Labs.

In terms of technical details, Polymarket claimed the issue has been “resolved,” but did not explain what specific fixes were implemented.

Some community members pointed out that after the incident, Polymarket seemed to have increased its one-time password length from three digits to six digits, but the company did not publicly comment on this.

05 Security Lessons: Systemic Risks of Third-Party Integrations

This is not the first time Polymarket has experienced security issues due to third-party services. As early as September 2024, multiple users logging in via Google accounts reported their USDC funds being transferred to phishing addresses.

Last month, a phishing attack exploiting the platform’s comment section led to losses exceeding $500,000. These incidents reveal a common challenge faced by crypto platforms: even if the core smart contracts are secure, dependent third-party services can become security weak points.

Industry analysis indicates that when users rely on and do not have direct control over the underlying authentication infrastructure, integrated systems are especially vulnerable to attacks.

06 User Response: Practical Recommendations for Asset Protection

For cryptocurrency users, the Polymarket incident offers important security lessons.

The most straightforward advice is to avoid using third-party login options and instead connect directly with wallets controlled by the user’s private keys. Although this increases the usage barrier, it is the best way to ensure asset security until the platform demonstrates it can protect third-party integrations.

Users should regularly check account activity, enable all available security features, and stay alert to any suspicious login attempts. Diversifying asset storage and not consolidating all funds on a single platform are also reasonable strategies to reduce risk.

Considering Polymarket’s plan to migrate to Polygon and launch its own Ethereum Layer 2 network, users should pay particular attention to asset security during the platform’s transition.

Future Outlook

As of December 25th, Polymarket’s total trading volume has reached $1.538 billion, with 419,309 monthly active users. When users wake up to find only $0.01 remaining in their accounts, this incident is no longer just a technical glitch but a severe test of the entire crypto ecosystem’s security architecture.

User fund security remains the cornerstone of Gate platform operations. In the face of complex security challenges in the crypto industry, Gate continues to strengthen its security infrastructure, providing users with multiple asset protection mechanisms.