Polymarket Tightens Integrity Rules Amid Insider Trading Debate
Polymarket’s new integrity rules draw new lines in the prediction market industry’s crypto sector.
Polymarket announced new rules for trading in its markets that prohibit three types of insider trading infractions:
- Trading on stolen confidential information
- Trading on illegal tips
- Trading by those who can influence the outcome
These guidelines apply to both Polymarket’s DeFi site and its US beta app. They also bring Polymarket more closely in line with the CFTC’s approach to insider trading. The CFTC focuses on how the information is used and obtained rather than simply possessing it in its insider trading cases.
It’s part of a debate within the prediction market industry regarding the role that inside information should play in establishing accurate prices.
Accurate prices vs. integrity of information
While some in the industry feel some information should be protected, others find accurate forecasts more valuable.
In October 2025, Jason Furman told a student that he was unconcerned about insider trading in Polymarket’s Nobel Prize winner market, because the price was more accurate as a result. A leaked photo accessible through the website’s metadata caused the Nobel Prize market’s movement.
That’s what I told the student, that I wasn’t actually that bothered by insider trading in these markets because it helped everyone else get information more quickly and reliably which I view as their main benefit.
— Jason Furman (@jasonfurman) October 10, 2025
The revelations of insider trading using classified military information clarified the stakes of choosing to protect certain types of information or prioritize market forecasts above certain information.
Coinbase CEO Brian Armstrong weighed the pros and cons of insider trading onstage in December 2025.
Armstrong argued that insider trading is a good thing if an accurate forecast is important above all else. His hypothetical example included an admiral with up-to-date information about a potential military event. He also claimed that a potential CFTC Chairman nominee asked whether insider trading should be prohibited at all.
Brian Armstrong addresses the Coinbase earnings call mention market incident pic.twitter.com/8q9uiVXcTC
— PredictionMarketTrader (@PredMTrader) December 3, 2025
Amid this debate, the prediction market industry continues to grow.
New prediction market VC fund
Two former Kalshi employees announced a new venture capitalist fund, 5c(c) Capital. Noah Zingler-Sterning, Kalshi’s former VP of Operations, and Adhi Rajaprabhakaran, the second trader to join Kalshi Trading, announced the fund on Monday.
They are raising up to $35 million for new companies in the prediction market industry and companies beyond it. Backers include rival prediction market platforms, Kalshi and Polymarket. Additionally, companies like The Chernin Group, Night Capital, and other investment firms are backing the fund.