Prediction market platforms Polymarket and Kalshi have each announced measures aimed at curbing insider trading, with both firms unveiling updates on the same day as political scrutiny of the industry continues to intensify. The moves come as Democratic lawmakers have begun targeting prediction markets, with some seeking to ban certain categories of markets outright, including those centered on armed conflict. The announcements signal a broader effort by the industry to get ahead of potential regulation.
Polymarket’s updates focus on clarifying its integrity rules and spelling out specific forms of prohibited conduct. Trading on insider information or acting on illegal tips are explicitly banned across both its decentralized finance platform and its Commodity Futures Trading Commission-regulated U.S. platform. Examples of prohibited behavior listed on the company’s market integrity page include a coach trading on a sports contract with knowledge of a star player’s availability, or a performer buying shares in a market predicting which songs will be played at an event they are part of.
Neal Kumar, Polymarket’s Chief Legal Officer, said the rule updates make the company’s expectations clear for all participants and highlight compliance infrastructure already in place. He added that as the platform grows, it will continue communicating clearly with users to ensure its markets serve their core purpose of surfacing accurate information. Polymarket says it uses a multi-layered monitoring system to detect potential violations on its international platform, while on the U.S. side it works with partners and a real-time control desk to identify unusual trading activity. The company has also announced a collaboration with Palantir, the data analytics firm co-founded by Peter Thiel, to build surveillance systems for sports-focused prediction markets.
Kalshi’s approach is more preemptive in nature. The firm announced a new policy barring individuals connected to college or professional sports — such as coaches and players — from trading on markets tied to the sports they are directly involved with. It is also rolling out screening lists for both athletes and politicians, enabling the platform to block potentially problematic trades before they are executed rather than investigating them after the fact.
Kalshi stated that these efforts have been in development for months and are designed to proactively address guidance from the CFTC as well as legislative proposals in Congress aimed at preventing insider trading on prediction markets. Both firms have also introduced mechanisms for reporting suspected violations. Polymarket allows users to submit reports via Discord or email, while Kalshi has embedded whistleblower functionality directly into its market pages so individuals can flag suspicious activity in real time. The full scope of how investigations proceed from those reports, or how frequently they are filed, has not been disclosed.
The announcements follow a series of high-profile incidents that have drawn public and regulatory attention to insider trading risks on prediction platforms. One anonymous trader earned more than $436,000 on a market tied to the January removal of Venezuelan President Nicolás Maduro, prompting New York Representative Ritchie Torres to draft legislation that would prohibit federal employees from trading on prediction markets when they possess relevant non-public information. In February, a video editor named Artem Kaptur, who worked for content creator Jimmy Donaldson, known publicly as MrBeast, was fined and suspended by Kalshi after trading on markets related to Donaldson’s YouTube content. Kaptur was subsequently fired from Beast Industries.
Separately, two Israeli nationals were arrested and charged with using classified military information to place bets on Polymarket about military operations, an incident that drew international attention to the vulnerability of prediction markets to abuse by those with privileged access to sensitive information. Representatives for both Polymarket and Kalshi did not respond to requests for comment on the latest announcements. The developments reflect a broader reckoning within the prediction market industry as it navigates questions about market integrity and its relationship with regulators.
Originally reported by Decrypt.
