Polymarket Bans Insider Trading Amid Scrutiny Over Suspicious Bets

Polymarket, based in New York, has updated its rules to combat insider trading amid growing scrutiny over prediction markets. The company now prohibits trades based on “stolen confidential information” or illegal tips and bans traders from placing bets if they hold a position of authority that could influence event outcomes.

The changes apply across the company’s U.S. exchange and offshore operations, where users can wager on events like elections, sports contests, and more. However, these platforms face criticism for potentially violating anti-gambling regulations and raising concerns about trading integrity.

Polymarket employs a “multi-layered monitoring system” to detect suspicious activity, which could lead to referral of cases to law enforcement or other disciplinary actions. The company’s chief legal officer emphasized that the rule enhancements clarify expectations across all platforms and highlight their compliance infrastructure.

Recent incidents, such as well-timed bets on the capture of former Venezuelan President Nicolás Maduro and the outbreak of war in Iran, have raised eyebrows. These led Senator Ruben Gallego to criticize “insider trading in broad daylight.” Polymarket aims to preempt potential congressional restrictions by strengthening its insider trading rules.

The Commodity Futures Trading Commission has also issued guidance on preventing insider trading for prediction markets, urging exchanges to engage with the agency’s staff when designing event contracts. Kalshi, another rival platform, is enhancing its ability to detect insider trading and tightening policies against market manipulation, including blocking politicians and athletes from certain markets and adding a whistleblower feature.