Polymarket has introduced new market integrity rules across
its decentralized finance (DeFi) platform and its CFTC-regulated U.S. exchange,
outlining how it enforces trading standards and handles suspicious activity.
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Clear Definitions on Insider Trading and Manipulation
Polymarket’s revised rules define three main types of
prohibited insider trading: trading on stolen confidential information, trading
on illegal tips, and trading by anyone with influence over an event outcome. Both platforms also ban various forms of manipulation,
including spoofing, wash trading, self-dealing, front-running, and fictitious
transactions.
Polymarket’s new integrity comes at a moment when Wall Street compliance desks are waking up to the fact that event markets can be used to trade on material non‑public information just as easily as equities or options.
JPMorgan and other large banks are now looking at how to extend their insider‑trading and information‑barrier policies to platforms like Kalshi and Polymarket, moving prediction markets from a regulatory grey zone into the core of their conduct‑risk frameworks.
Polymarket said the updates, detailed in the
DeFi platform’s Terms of Use and the Polymarket U.S. Rulebook, reinforce
measures against insider trading and market manipulation while promoting user
protection and transparency. It launched dedicated Market Integrity pages to explain how
these rules apply in practice and to guide users on reporting suspicious
activity.
Polymarket said it maintains a multi-tiered surveillance
structure on both platforms. On its DeFi platform, all transactions occur on
the Polygon blockchain, providing on-chain transparency.
Multi-Layered Surveillance Framework
The company works with technology partners to identify
potential irregularities, with enforcement actions ranging from wallet bans to
referrals to law enforcement.
On its U.S. exchange, oversight includes external trade
surveillance experts, an internal real-time control desk, and a Regulatory
Services Agreement with the National Futures Association (NFA) to investigate
and sanction rule violations.
Meanwhile, platforms are racing to meet that bar by importing familiar market‑abuse concepts—clear definitions of insider trading, bans on spoofing and wash trades, layered surveillance, and formal ties to bodies like the NFA—into both DeFi venues and CFTC‑regulated exchanges.
That convergence means prediction markets are starting to look less like a quirky side bet and more like another structured product that banks, regulators, and compliance teams can plug into their existing rulebooks.
This article was written by Jared Kirui at www.financemagnates.com.
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