Decentralized prediction platforms Polymarket and Kalshi are overhauling their rules of engagement. The companies have released a new set of standards designed to end unregulated trading. The move comes as Wall Street analysts recognize that crypto event markets—where users bet on the outcomes of elections, trials, or matches—have become venues for profiting from confidential information, similar to traditional stock markets.
To ensure transparency and protect average users, Polymarket and Kalshi have introduced strict prohibitions and established a comprehensive trade monitoring system.
Polymarket Insider Trading Ban: Three Primary Prohibitions
The updated rules clearly define who is barred from betting and how. Illegal insider trading now covers three specific scenarios:
- Trading on stolen data. This applies if a user bets using confidential information obtained through illegal means.
- Using illegal “tips.” This includes profiting from secret data leaked by company or agency employees before an official public announcement.
- Conflict of interest. Betting is strictly prohibited for individuals who have direct influence over the outcome of an event, such as athletes in a match or politicians making a decision.
Combating Manipulation and Fake Activity
In addition to targeting insiders, the platforms have declared war on market manipulators. Polymarket and Kalshi now officially prohibit:
- Spoofing (placing large fake orders to scare other players into selling assets at lower prices).
- Wash trading (when a person sells an asset between their own wallets to create the illusion of high demand).
- Front-running (when someone, knowing about a large incoming order, buys the asset a fraction of a second earlier to immediately resell it at a higher price).
Enforcement Measures
Polymarket, for instance, has established a dual oversight system.
On the global DeFi platform, the Polygon blockchain serves as the primary auditor, providing transparent transaction records. The company has contracted specialized technology firms whose algorithms identify suspicious trading patterns, block manipulator wallets, and report data directly to law enforcement. The site also now features dedicated pages where users can report suspicious activity.
On the U.S. version of the exchange, oversight is even stricter. External trade surveillance experts monitor transactions in real time. Furthermore, Polymarket has entered into an agreement with the National Futures Association (NFA), which will conduct official investigations and penalize violators according to traditional market laws.
The Senate: A Greater Threat Than Insiders
Despite these efforts to operate as legitimate and transparent financial instruments, an existential threat looms over these platforms.
Two U.S. senators are drafting a bill that could completely ban sports betting in the country. Sports events generate the majority of revenue and traffic for both Polymarket and its main competitor, Kalshi. If the law is passed, advanced anti-spoofing systems will not protect prediction markets from massive financial losses.
