Polymarket is updating the rules of its platform to crack down on insider trading as the prediction market giant looks to curb scrutiny over market manipulation.
Announced Monday, the updated rules outline three distinct categories of insider trading that will be prohibited on the platform. These include trading on stolen confidential information, meaning trading based on confidential information that violates a preexisting obligation; trading on illegal tips, meaning trading based on information that was passed down illegally; and trading by those who can influence the outcome.
“Markets thrive on clarity,” Neal Kumar, Chief Legal Officer of Polymarket, said in a press release. “These rule enhancements make our expectations abundantly clear for every participant across both platforms and highlight the compliance infrastructure we have already built.”
Prediction markets like Polymarket and Kalshi have exploded in popularity due to the surge in sports betting , but these platforms allow users to take it an extra step further. For those interested in monitoring the situation, prediction markets allow users to bet on current event—anything from election results to the next war’s start date. But as markets become mainstream, scrutiny follows.
Take an instance following the capture of former Venezuelan president Nicolás Maduro where an anonymous trader saw a big payout of $400,000 after betting the then-president would soon leave office. While the lucrative payout incentivizes many to join the markets, it also raised the question of whether someone with insider knowledge could have financially benefitted from it.
Another instance could have been contract wagering on whether Iran’s supreme leader would be ousted by March 1—users with advance knowledge of the attack that ultimately killed him on February 28 could have turned that into a lucrative position.
On Monday, Kalshi unveiled a new effort to curb the possibility of insider trading, reportedly planning to prevent bets on sports by athletes and coaches, as well as blocking politicians from betting on the outcomes of their races.
It follows other efforts to rein in users betting about outcomes they may have knowledge about. Recently, Kalshi suspended a trader who profited off of a bet made with inside information related to his employer Mr Beast.
Polymarket’s updated rules state that users trying to pull a similar stunt on its platform could lead to “suspension, termination, monetary penalties, or referral to regulatory or law enforcement authorities.”
Kumar added, “As Polymarket continues to scale, we will build on our foundation with clear communication to Polymarket’s users to ensure our markets do what they do best — surface truth.”