Polymarket Tightens Insider Trading Rules as Market Scrutiny Grows

The updated framework clarifies prohibited conduct, including trading on confidential information, acting on illegal tips and participation by individuals who can directly influence event outcomes.

The company also launched new market integrity pages and reporting channels aimed at tightening enforcement across both platforms, according to a 23 Mar announcement.

Rising scrutiny over suspicious trades

The regulatory move arrives as prediction markets face growing pressure from regulators and market participants following a series of high-profile trades tied to geopolitical events. Recent weeks have seen heightened attention on the sector as trading volumes surged around global flashpoints, including highly coordinated activity surrounding the Iran conflict that raised serious questions over fairness and potential insider access.

Such activity has fuelled concerns that participants with privileged or early information could be exploiting structural gaps in oversight, particularly on offshore platforms where enforcement is less clearly defined.

Formalizing rules as the sector scales

Polymarket operates its primary platform offshore but is currently building a regulated US presence through a designated contract market overseen by the Commodity Futures Trading Commission (CFTC). This dual structure has placed the firm at the centre of ongoing debates over how prediction markets should carefully balance open access with strict market integrity.

Lawmakers and regulators have already begun to respond to these structural challenges. The federal commodities regulator recently opened a formal consultation regarding insider trading risks in event-based contracts, while US senators have proposed legislation targeting specific types of prediction market activity in politically sensitive areas and sports.

Codifying multi-layered market oversight

The updated rules codify a multi-layered surveillance approach that combines onchain transparency with offchain monitoring and strategic partnerships with third-party surveillance providers, company representatives detailed in a statement. Oversight on its US exchange includes real-time monitoring and a regulatory services agreement with the National Futures Association, aligning its internal controls much more closely with traditional derivatives markets.

The sweeping rule changes materialize as the federal regulator signals cautious support for the growth of prediction markets within a regulated framework, even as it actively seeks input on how to address manipulation risks. The ongoing tension reflects the rapid expansion of the sector. The total number of listed event contracts has surged in recent years, while platforms including Polymarket and Kalshi have attracted multi-billion-dollar valuations and growing institutional interest.