Polymarket introduces stricter insider trading and market manipulation rules

Prediction markets platform Polymarket has announced that it has updated its market integrity rules across its DeFi platform and its U.S. exchange, which is regulated by the Commodity Futures Trading Commission (CFTC).

The latest rules can be found in the terms of use of its DeFi platform and the rulebook of Polymarket U.S., and extend the requirements that govern insider trading and market manipulation on its platform. 

However, the question on the mind of some is whether the new rules change much in practice.

What exactly has Polymarket prohibited?

The updated rules set out three categories of banned conduct. It states that traders may not act on confidential information if doing so violates a pre-existing duty of trust or confidence owed to another party. 

They may not trade on tips passed from someone who was themselves bound by such a duty. 

And finally, those who are in places of authority that are sufficient enough to influence the outcome of an event, for example, a political candidate betting on their own result, are outrightly barred.

“Markets thrive on clarity,” said Neal Kumar, Polymarket’s chief legal officer. “These rule enhancements make our expectations abundantly clear for every participant across both platforms.”

On Polymarket’s DeFi platform, all transactions run on the Polygon blockchain and are publicly viewable on-chain, providing a layer of built-in transparency. 

Polymarket may ban wallet addresses and refer cases to law enforcement. Sanctions on its U.S. platform can include fines, suspension or termination of an account, and regulatory referral.

What drove Polymarket to act now?

While the updated rules place a higher premium on user protection, Polymarket did not arrive at that juncture without some external pressure engineered by controversial actions that were taken on its platform, and rising debates from regulators who want to curb the excesses of prediction markets.

A notable event that raised eyebrows and prompted regulators to take a closer look at the market occurred in January 2026, following the removal of Venezuelan leader Nicolas Maduro from office by U.S. President Donald Trump.

A newly created account on Polymarket had placed a $32,000 wager that Maduro would be removed from power by the end of the month, hours before U.S. forces seized him. That account made more than $430,000 on that bet.

Many analysts said that it had all the signs of a trade done off the back of inside information.

A month later, Israeli authorities charged two people on suspicion of using classified military information to bet on Polymarket ahead of attacks on Iran.

Rival platform Kalshi disclosed its first public enforcement actions around the same period, suspending a video editor for MrBeast who had been trading on non-public information about the streamer’s content. 

Kalshi also fined and banned the account of a California gubernatorial candidate who bet on his own election outcome, while also reporting the incident to the CFTC.

When the U.S. and Israel struck Iran on February 28, blockchain analytics firm Bubblemaps identified six accounts that collectively made $1 million by betting on the exact date of the strikes. All these accounts were funded within 24 hours of the attack. 

A Polymarket account with the username Magamyman had around $553,000 on bets tied to the fate of Iran’s Supreme Leader Ali Khamenei. In total, over $529 million was traded on Polymarket contracts linked to the timing of the Iran strikes.

The events surrounding the death of Iran’s Supreme Leader, Ayatollah Khamenei, also exposed the different philosophies of the two leading platforms. Kalshi, which had listed a market on “Khamenei out as Supreme Leader,” refused to pay out on the outcome of his death. “We don’t list markets directly tied to death,” Kalshi’s CEO Tarek Mansour wrote on X. 

The company reimbursed all fees and paid out positions at the last-traded price before Khamenei’s death. 

Polymarket, trading offshore, faced no equivalent constraint.

In response to public officials and those working with them creating, buying, or selling prediction markets as well as curbing the potential for insider actions, Congressman Ritchie Torres put forward the Public Integrity in Financial Prediction Markets Act of 2026 in January. 

The bill, which has attracted more than 40 Democratic co-sponsors, would prohibit anyone with access to material non-public information relevant to a government-related contract, regardless of any formal duty, from trading on prediction markets.

With the hammer looking likely to swing heavily on prediction market operations, it is understandable that the leading platforms will take proactive actions to protect their users and, by extension, themselves.

 How effectively Polymarket enforces its set rules will be assessed in the near future. For now, it is seen as a step in the right direction.