Polymarket’s $500,000 Hack Spurs Move from Polygon to Ethereum Layer 2

- Users lost funds in a $500,000 breach tied to Magic Labs. - Polymarket to leave Polygon, launch Ethereum Layer 2 network. Polymarket, a decentralized prediction market platform, reported a $500,000 security breach that impacted several user accounts. A vulnerability linked to a third-party authentication provider caused the breach, raising significant concerns among users. In response, Polymarket announced a strategic migration from the Polygon network. The company will launch its own Ethereum Layer 2 network, POLY, citing ongoing infrastructure challenges. On December 24, 2025, Cryptopolitan reported that a security issue with a third-party authentication provider led to hacks on Polymarket user accounts. Polymarket did not confirm the provider’s identity; however, social media speculation pointed to Magic Labs, a service that offers non-custodial wallet sign-ins via email. Several users claimed hackers wiped their account balances. One user reported their funds were reduced to just $0.01, while another victim described losses despite enabling two-factor email authentication. Additionally, users alleged that hackers exploited Polymarket’s comment sections to execute scams. Polymarket confirmed it resolved the vulnerability and assured it would contact affected users individually. Simultaneously, Polymarket announced its departure from the Polygon network to develop its own Ethereum Layer 2 solution. The company cited recurring operational disruptions on Polygon as a major factor for this transition. Reports indicated that Polygon’s network experienced 15 outages or maintenance incidents throughout 2025. A notable disruption on December 18 impacted Polymarket’s order-matching functions. A Polymarket representative emphasized that the new proprietary Layer 2 will prioritize stability and infrastructure control to enhance the user experience. The migration to POLY will likely impact the broader Polygon ecosystem significantly. According to Defillama, Polymarket holds an estimated $326 million in open positions. This figure represents roughly 25% of the $1.19 billion total value locked within Polygon. Additionally, Polymarket contributes 25% of Polygon’s transaction fee volume. By moving to POLY, Polymarket aims to become a full-stack decentralized application that can handle its own technical infrastructure. As of 16:08 UTC on December 24, market data showed Ethereum (ETH) trading at $2,928.03. This price reflects a -0.52% change in its 24-hour trading volume. Polygon (POL) was trading at $0.106, with a -0.37% change during the same period.