Polymarket has announced a significant update to its rules, aiming to bolster market integrity across both its decentralized finance (DeFi) platform and its CFTC-regulated U.S. exchange. The new regulations explicitly prohibit insider trading and various forms of market manipulation, following criticism related to a high-profile payout on a Venezuelan political event.
The updated insider trading policy categorizes prohibited activities into three clear types. Users are banned from trading based on stolen confidential information tied to an event's outcome. Trading on illegal tips is forbidden if the recipient knows the information was improperly obtained. Furthermore, individuals in positions of authority or influence that could affect an event are prohibited from trading on related contracts. These restrictions are now detailed in Polymarket's Terms of Use and U.S. Rulebook.
Beyond insider trading, the rules also target market manipulation. Explicitly banned activities now include spoofing, wash trading, front-running, fictitious transactions, and self-dealing. The policy aims to curb any action that disrupts orderly market operations or undermines transparency, with enforcement extending to attempted manipulation and disruptive conduct.
Enforcement mechanisms differ between the DeFi and U.S. platforms but share a multi-layered approach. On the DeFi platform, which operates on the Polygon blockchain, all trades are publicly recorded. Suspicious behavior can trigger reviews, wallet bans, or referrals to law enforcement. Polymarket US employs a three-tiered surveillance system: partnerships with specialist firms, a real-time control desk, and collaboration with the National Futures Association (NFA). Potential violations may lead to suspensions, monetary penalties, or regulatory referrals.
The company has established dedicated Market Integrity pages to guide users on reporting suspicious activity, ensuring participants understand the rules and enforcement process. These changes position Polymarket as a compliant and transparent platform amid increasing industry scrutiny and regulatory attention on prediction markets.
