Polymarket has introduced updated market integrity rules for both its DeFi platform and its CFTC-regulated US exchange, aiming to curb insider trading amid growing scrutiny over whether some participants use privileged information to gain an advantage when betting on events.
Polymarket Hopes to Curb Insider Trading
The updated guidelines impose tighter restrictions on insider trading and focus on three specific forms of misconduct. Firstly, they ban trading based on stolen information about an event’s outcome when doing so would violate a duty of trust. They also prohibit acting on illegal tips, where users knowingly rely on privileged information provided by someone who is not allowed to use or share it.
In addition, individuals who can influence contract outcomes are barred from trading on related contracts under the new rules. These include decision-makers at high places or those with special access to information.
Neal Kumar, chief legal officer of Polymarket, said that markets thrive on clarity and that the rule enhancements are designed to make expectations clear for all participants. Kumar also added that as Polymarket continues to scale, the company will build on this foundation through clear communication with users to ensure its markets continue to do what they do best.
It’s interesting to note that these new regulations come as US lawmakers recently presented a new bill aimed at curbing prediction market insider trading by making it illegal to operate markets tied to sensitive government actions.
How Does Polymarket Plan to Impose the New Rules?
On its DeFi platform, Polymarket employs a multi-layered monitoring system and works with leading surveillance and technology partners to safeguard market integrity. Its architecture, where all trades are executed on the Polygon blockchain, offers inherent transparency. Trading activity is publicly visible on-chain, and contract holders are easily accessible via polymarket.com.
When unusual or potentially suspicious activity is flagged by either Polymarket or its community, the company may conduct a review and take disciplinary action. This also includes banning wallet addresses or referring cases to law enforcement.
Meanwhile, oversight of Polymarket US operates on three levels. Firstly, there are collaborations with top-tier trade surveillance and technology providers. Secondly, Polymarket uses a control desk that monitors markets in real time to detect irregular or disruptive trading. And lastly, there’s a Regulatory Services Agreement with the National Futures Association (NFA). It handles trade practice surveillance, identifies potential rule breaches, and investigates and sanctions violations.
Users found to have breached Polymarket US rules or applicable laws may face penalties such as suspension, termination, fines, or referral to regulatory or law enforcement authorities.
Despite all the new rules, however, it seems that they were too late to help the company maintain its foothold in Argentina, as just last week, the country imposed a complete ban on Polymarket, saying the prediction markets provider bypassed national gambling laws.
Polymarket has introduced updated market integrity rules for both its DeFi platform and its CFTC-regulated US exchange, aiming to curb insider trading amid growing scrutiny over whether some participants use privileged information to gain an advantage when betting on events. Polymarket Hopes to Curb Insider Trading The updated guidelines impose tighter restrictions on insider trading