TLDR
- Kalshi and Polymarket both announced new insider trading safeguards on the same day amid pressure from U.S. lawmakers and regulators.
- Kalshi is launching tech tools to preemptively block politicians and athletes from trading on their own events.
- Polymarket expanded its market integrity rules and is building an AI-powered surveillance platform with Palantir and TWG AI.
- A recent survey found 60% of prediction market users suspect insider trading is happening on these platforms.
- Multiple federal and state bills have been introduced to regulate or ban prediction markets across the U.S.
Kalshi and Polymarket, two of the biggest prediction market platforms in the U.S., announced new measures on the same day to fight insider trading and market manipulation.
The moves come as federal lawmakers and regulators have turned up the pressure on the prediction market industry. Both platforms said the changes include stricter trading restrictions, new enforcement tools, and better surveillance systems.
Kalshi said it is rolling out what it calls “technological guardrails” that will preemptively block politicians, athletes, and other relevant individuals from trading on certain politics and sports markets. The company said it already had rules against this kind of activity but previously relied on investigations after trades were placed.
The platform pointed to a recent enforcement action against a political candidate who traded on their own election. Kalshi said its new tools would stop trades like that before they happen.
Kalshi Partners With Integrity Firm for Sports Screening
Kalshi is also working with integrity firm IC360 to screen and block individuals involved in college and professional sports from trading on contracts tied to their leagues. The company is adding a whistleblower tool so users can flag suspicious trades directly on market pages.
Kalshi said it had been developing these changes for months. It added that it wants to work with regulators and stakeholders to make these measures an industry standard.
Polymarket took a different approach but made similar changes. The platform updated its market integrity rules across both its international crypto platform and its CFTC-regulated U.S. exchange.
The updated rules spell out three categories of banned trading. These include trading on stolen confidential information, trading on illegal tips, and trading by people who can influence the outcome of an event.
Neal Kumar, Polymarket’s Chief Legal Officer, said markets “thrive on clarity.” He said the new rules make the platform’s expectations clear for every participant.
Polymarket Builds AI Surveillance With Palantir
Polymarket also said it is launching Market Integrity pages where users can learn about the new rules and report suspicious activity. The platform said it bans spoofing, wash trading, front-running, self-dealing, and other manipulative practices.
For enforcement, Polymarket said it will rely on multi-layered surveillance. The company recently announced a partnership with Palantir Technologies and TWG AI to build an AI-powered surveillance platform.
The surveillance system includes blockchain transparency, real-time monitoring, third-party partnerships, and oversight by the National Futures Association on its U.S. exchange.
The changes follow growing concerns about insider trading on prediction markets. A Truist Securities survey found that 60% of prediction market users suspect insider trading is happening on these platforms.
Past incidents have added to those concerns. Unusual trading patterns were spotted on Polymarket contracts tied to U.S. military action in Iran and Venezuela. On Kalshi, reports raised questions about certain Super Bowl markets.
The CFTC has not announced investigations into those trades. However, the agency recently issued updated guidance on insider trading and manipulation risks in prediction markets.
At the federal level, lawmakers have introduced several bills targeting prediction markets. These include the BETS OFF Act, the Public Integrity in Financial Markets Act, the End Prediction Market Corruption Act, and the Fair Markets and Sports Integrity Act.
State-level action is also picking up. The Hawaii House recently passed a bill to prohibit prediction markets. A Tennessee House subcommittee advanced a similar ban last week. Bills are also active in Iowa, Minnesota, Illinois, New York, and New Jersey.
Multiple states are also in legal battles with prediction market platforms. Most of those disputes center on sports event contracts, which state gaming regulators say amount to illegal sports wagering.
The CFTC has also sought public feedback as it works on creating new regulations to govern prediction markets going forward.
