Polymarket Tightens Insider Trading Rules In Policy Shift

Polymarket has introduced a new set of market integrity rules, a clear shift in its approach to insider trading. The updates are reflected in its Terms of Use and the Polymarket US Rulebook, expanding the scope of prohibited conduct while strengthening compliance systems.

The move follows recent regulatory developments from the Commodity Futures Trading Commission. It also represents a reversal from CEO Shayne Coplan’s earlier position that insider trading could function as a market signal.

The revised rules define three specific categories of misconduct. Users are now prohibited from trading on stolen information where doing so breaches trust. The framework also bans activity based on illegal tips involving restricted information. Individuals who can influence event outcomes or access sensitive data are no longer allowed to participate in related markets.

Polymarket said the changes are aimed at improving trust and clarity as the platform scales. It has also introduced dedicated Market Integrity pages to outline enforcement procedures and provide reporting channels for suspicious activity.

Expanded controls target manipulation across markets

The updated framework extends beyond insider trading to address a range of manipulative behaviours. These include spoofing, wash trading, fictitious transactions and front running.

The policy also captures self-dealing and information-based manipulation, covering both direct and indirect actions. This creates a more comprehensive structure for identifying abuse across different trading scenarios.

Polymarket relies on a layered surveillance system to enforce these rules. Activity on the platform takes place on the Polygon network, where transaction data is publicly visible. This transparency allows both internal teams and external observers to analyse trading patterns.

When irregular behaviour is detected, the platform can initiate investigations, block wallet addresses or escalate cases to law enforcement.

Industry response reflects rising regulatory pressure

The timing of these changes aligns with increased scrutiny across the prediction market sector. Rival platform Kalshi has also introduced new safeguards targeting insider trading and market manipulation.

Kalshi’s approach includes restrictions on individuals closely connected to specific markets. Politicians, athletes and other participants are blocked from trading on outcomes they may influence.

The company has also added a whistleblower feature to encourage reporting of suspicious activity. It acknowledged that determined actors may still attempt to bypass controls despite these measures.

These policy updates are closely tied to regulatory signals from the CFTC and proposed legislation to define prediction markets.

Suspicious trading activity fuels ongoing debate

Recent trading patterns have intensified concerns about how these platforms are used. A report by The Guardian highlighted accounts that placed nearly $70,000 in bets on a potential ceasefire between Iran and the United States, with potential returns exceeding $800,000.

Some accounts appeared to split activity across multiple wallets, a tactic that may obscure identity or indicate coordinated behaviour. Analysts suggested that such patterns could involve large investors or participants with access to privileged information.

Polymarket is also facing an investigation in Israel linked to markets offered around the Iranian conflict. These developments have raised questions about whether event-based trading can be influenced by non-public information.

The growing relevance of prediction markets has increased the urgency around enforcement. Platforms are now adjusting their rules in response to regulatory pressure and public scrutiny while attempting to maintain market credibility.