Polymarket Updates Rules to Ban Insider Trading and Illegal Tips

Polymarket updated its rules to prohibit trades based on "stolen confidential information" or illegal tips, a move that crystallizes months of mounting pressure on the New York-based prediction market over a string of suspiciously profitable bets that observers say could only have been placed by someone with inside knowledge.

The updated rules clarify three core categories of prohibited insider trading conduct: trading on stolen confidential information, trading on illegal tips passed from someone who owed a preexisting duty of trust or confidence to someone else, and trading by anyone who holds a position of authority or influence sufficient to affect the outcome of the underlying event. Under that last prohibition, for example, CEOs of a public company would not be allowed to trade on a market focused on how many times they will use a certain word during an earnings call with Wall Street analysts.

"Markets thrive on clarity," said Neal Kumar, chief legal officer of Polymarket. "These rule enhancements make our expectations abundantly clear for every participant across both platforms and highlight the compliance infrastructure we have already built." Kumar added: "As Polymarket continues to scale, we will build on our foundation with clear communication to Polymarket's users to ensure our markets do what they do best — surface truth."

The backdrop for those assurances is a series of bets that read less like informed speculation and more like foreknowledge. Shortly before the capture of Venezuelan President Nicolás Maduro, an anonymous Polymarket user bet more than $32,000 that Maduro would be ousted within weeks, yielding a return of more than $400,000. In December 2025, a separate user's accurate bets on Google's 2025 Year in Search rankings produced a payout of nearly $1,000,000; that same account earned over $150,000 by correctly predicting the exact launch date of a new Google product. In October 2025, a new Polymarket account reportedly staked $40,000 on OpenAI launching an AI web browser by month's end. One user appeared to make hundreds of thousands of dollars on wagers related to the timing of U.S. strikes on Iran.

Senator Ruben Gallego, a Democrat from Arizona, captured the public mood in four words posted to social media: "Insider trading in broad daylight." Rep. Ritchie Torres separately introduced a bill that would ban government officials from trading on prediction markets using insider information, a direct legislative response to the Maduro bet.

Polymarket explained that if it or its users find "unusual or potentially questionable trading activity," the platform would conduct a review and, if necessary, ban the wallet address, refer the issue to law enforcement, or impose "monetary penalties." On its U.S. exchange, surveillance operates at three levels: partnerships with trade surveillance and technology specialists; a control desk conducting real-time surveillance; and a Regulatory Services Agreement with the National Futures Association to conduct trade practice surveillance, detect potential rule violations, and investigate and sanction violators.

What enforcement looks like in practice is already on the record at rival platform Kalshi. A recent case saw MrBeast's video editor suspended for two years from the platform and fined five times the amount of his initial trade size after Kalshi concluded its investigation. After prediction markets had a breakout year in 2025, with trading volume increasing fourfold to $60 billion, Kalshi announced it had reported two insider trading cases to the Commodity Futures Trading Commission, opened 200 investigations, and frozen several flagged accounts over the past year.

The rule changes did not arrive in a vacuum. As part of a proposed rulemaking process, the CFTC encouraged exchanges to engage with its staff when designing event contracts to identify potential "manipulation or price distortion risks." Stephen Piepgrass, a partner at Troutman Pepper Locke who leads the firm's regulatory practice, told CBS News the timing is deliberate. "There had been a lot of concern around trading on the U.S. market from outside the U.S. borders and vice versa," Piepgrass said. "So I do think part of this is about trying to create an approach that applies everywhere." He added that platforms are almost certainly acting to get ahead of Congress: "I think the concern is, if these market platforms don't implement their own regimes, then someone's going to do that for them."

Polymarket had already been building its compliance architecture before Monday's rule announcement. On March 10, Polymarket enlisted firms including Palantir Technologies to help police its sports contracts as prediction markets faced intense scrutiny over insider trading. The system uses Palantir's data infrastructure and TWG AI's analytics to monitor trading activity, detect unusual trading patterns, screen participants, and generate compliance reports that could be shared with regulators or sports leagues.

On Tuesday, Democratic Senator Adam Schiff of California and Republican Senator John Curtis of Utah introduced legislation to ban trades on prediction markets that resemble a "sports bet or casino-style game," adding a second legislative front to the pressure Polymarket is already navigating. With the CFTC's proposed rulemaking still unfinished and Torres's bill still working through Congress, Polymarket's rule rewrite may be less a final answer than an opening bid in a longer negotiation with Washington.