Polymarket tightens rules to curb manipulation, insider trading risks

The prediction bourse rolls out stricter trading safeguards and market limits across its platforms as it seeks regulatory alignment and addresses concerns over fairness.

Prediction platform Polymarket has updated its market integrity rules to align more closely with regulatory standards and expand its presence as a regulated trading platform amid growing scrutiny of manipulation and insider trading risks.

In a Monday announcement, the company outlined updated rules governing both its global decentralized finance platform and its US exchange, which operates under compliance oversight by the Commodity Futures Trading Commission (CFTC).

The changes come amid growing scrutiny from regulators and politicians over risks tied to insider trading, market manipulation, and the proliferation of controversial event-based contracts.

Polymarket said the updates include stricter market design standards, clearer resolution criteria — which determine how outcomes are settled — and more defined data sources. The company said it was also enhancing monitoring and surveillance measures to detect suspicious trading activity.

In addition, Polymarket said it would limit certain types of markets, including those deemed easily manipulated or ethically sensitive.

Last week, the company said it had banned and reported users who pressured an Israeli journalist with death threats to amend a news article about an Iranian missile strike that was the subject of a $17 million prediction market.

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Prediction markets have surged in popularity, attracting a growing base of active traders wagering on real-world events. The momentum helped Polymarket raise $200 million in July and reportedly seek a valuation of up to $10 billion.

However, regulators remain cautious. Several US states have taken action against prediction platforms, alleging they operate as unlicensed gambling services.

Monday’s announcement came days after Major League Baseball signed a deal with Polymarket, alongside a separate agreement with the CFTC focused on so-called “integrity protections.” The arrangements signal a broader push to legitimize prediction markets through partnerships and regulatory alignment.

Ethical concerns have also intensified. In one widely cited case, a small group of Polymarket accounts reportedly generated roughly $1 million in profits by correctly timing bets on US strikes on Iran, raising concerns about potential insider trading and market fairness.

As Bloomberg reported, all six accounts were newly created in February and had only ever wagered about whether the strikes would occur.

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Source: CoinTelegraph