Polymarket tightens rules on insider trading and manipulation across DeFi, U.S. platforms

Polymarket has introduced updated market integrity rules across its DeFi platform and CFTC-regulated U.S. exchange. It tightens restrictions on insider trading and market manipulation as the prediction market continues to scale.

The changes, announced on 23 March, update the platform’s Terms of Use and U.S. rulebook. It is also launching new market integrity pages outlining enforcement mechanisms and reporting processes.

Polymarket sets clearer rules on insider trading

The updated framework defines three specific categories of prohibited insider trading activity.

Users are barred from trading on stolen confidential information, including non-public data that could influence the outcome of an event.

The rules also prohibit trading on illegally obtained tips, where users knowingly act on information shared in breach of trust or confidentiality.

Additionally, Polymarket bans trading by individuals who hold positions of influence over an outcome, such as those directly involved in events tied to prediction markets.

The company said the changes are designed to bring greater clarity to participants and reinforce expectations across both platforms.

Expanded crackdown on manipulation tactics

Beyond insider trading, the updated rules explicitly prohibit a range of manipulative behaviors.

These include spoofing and wash trading, front-running and self-dealing, fictitious transactions, and broader attempts to disrupt orderly market activity.

The framework also covers information misuse and any effort to influence contract outcomes artificially.

Multi-layered surveillance system introduced

Polymarket outlined separate enforcement approaches for its DeFi platform and its U.S. exchange.

On the DeFi side, the platform relies on blockchain transparency, with all trades recorded on the Polygon network and publicly accessible. Third-party surveillance tools and internal monitoring systems complement this.

If suspicious activity is detected, enforcement actions may include wallet bans, internal investigations, or referrals to law enforcement.

For its U.S. exchange, Polymarket said it operates a more structured compliance system, including real-time monitoring via a control desk and partnerships with surveillance providers. 

Also, there is oversight through a Regulatory Services Agreement with the National Futures Association [NFA].

Violations on the U.S. platform may result in suspensions, financial penalties, or regulatory referrals.

Scrutiny grows over prediction market activity

The rule update follows earlier scrutiny of trading activity on the platform.

Early in the month, AMBCrypto reported a cluster of linked wallets that collectively earned over $1 million from bets predicting U.S. and Israeli military strikes involving Iran. 

The timing of those trades raised questions about whether participants may have acted on non-public or privileged information.

While no formal wrongdoing was established, the findings added to broader concerns about insider trading risks in decentralized prediction markets.

Final Summary

• Polymarket has tightened rules on insider trading and manipulation, introducing clearer definitions and stronger enforcement mechanisms.
• The update follows earlier scrutiny of suspicious trading activity, highlighting ongoing integrity challenges in prediction markets.