Kalshi and Polymarket Announce New Measures To Curb Insider Trading

Kalshi and Polymarket announced new measures on the same day to curb insider trading and market manipulation amid growing pressure from U.S. lawmakers. The updates include stricter trading restrictions, new enforcement mechanisms, and enhanced surveillance.

Kalshi Introduces Preemptive Trading Screening

Kalshi is launching new “technological guardrails that preemptively block politicians, athletes, and other relevant people from trading in certain politics and sports markets.” The company said it already prohibits such activity under its rules, but enforcement previously relied on post-trade investigations.

Kalshi added that it had been developing these efforts for months. It says it looks forward to engaging with regulators and stakeholders to make these new measures an industry standard.

According to Kalshi, the measures proactively address CFTC’s guidance and various Congressional bills targeting insider trading.

Among the measures introduced are:

• Preemptive politician screening: New tools that will preemptively block political candidates from trading on their own campaigns. Kalshi noted a recent enforcement action against a candidate who traded on their own election, saying the new tools will preemptively block such trades.
• Preemptive sports screening and new policy: Kalshi will now block individuals involved in college and professional sports from trading contracts in affiliated leagues. While the company said it has banned such trades, it has investigated potential insider trading after trades were placed. Now, in partnership with integrity firm IC360, the platform will conduct preemptive screening.

Kalshi is also adding a whistleblower tool that allows users to flag suspicious trades directly on the market pages.

Polymarket Formalizes Insider Trading Prohibitions

Polymarket’s update centers on expanded market integrity rules across its international cryptocurrency platform and its CFTC-regulated U.S. exchange.
The updated rules clarify three categories of prohibited trading:

• Trading on stolen confidential information
• Trading on illegal tips
• Trading by individuals who can influence the outcome of an event

Neal Kumar, Chief Legal Officer of Polymarket, said that markets “thrive on clarity.” He added:

“These rule enhancements make our expectations abundantly clear for every participant across both platforms and highlight the compliance infrastructure we have already built. 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.”

Polymarket announced it is also launching Market Integrity pages. They clarify how the new rules work and allow users to report suspicious activity.

In addition to insider trading, Polymarket said it prohibits spoofing, wash trading, front-running, self-dealing, and other manipulative practices.

Polymarket said enforcement will rely on multi-layered surveillance. Recently, the company announced a partnership with Palantir Technologies and TWG AI to develop a new artificial intelligence-powered surveillance platform.

The surveillance includes blockchain transparency on its international platform, real-time monitoring, third-party surveillance partnerships, and oversight by the National Futures Association (NFA) on its U.S. exchange.

Platforms Respond to Growing Integrity Concerns

The updates come as concerns about insider trading in prediction markets have intensified. A recent Truist Securities survey revealed that 60% of prediction market users suspect insider trading on the platforms.

Past incidents have raised persistent questions about whether users with non-public information can exploit these markets.

Examples include unusual trading patterns on Polymarket’s contracts tied to U.S. military action in Iran and Venezuela. On Kalshi, reports questioned certain Super Bowl markets.

The CFTC has not announced investigations into these trades, but recently issued updated guidance addressing insider trading and manipulation risks in prediction markets. The agency has also sought public feedback as it creates new regulations to govern prediction markets.

Regulatory and Legislative Pressure Builds

In addition to questions surrounding unusual trading patterns, the rule changes arrive amid growing political pressure.

At the federal level, lawmakers have introduced multiple proposals targeting prediction markets, including the BETS OFF Act, the Public Integrity in Financial Markets Act, the End Prediction Market Corruption Act, the Prediction Markets are Gambling Act, and the Fair Markets and Sports Integrity Act.

Lawmakers have also introduced legislation at the state level.

Earlier this month, the Hawaii House passed a bill to prohibit prediction markets. Meanwhile, last week, a Tennessee House subcommittee advanced a bill that would explicitly prohibit prediction market platforms in the state. Similar measures are active in Iowa, Minnesota, Illinois, New York, and New Jersey.

Separately, multiple states are involved in legal battles with prediction market platforms, such as Kalshi and Polymarket. Most arguments center on sports event contracts, which gaming regulators say constitute illegal sports wagering under state laws.

The introduction of the new changes underscores how concerns about insider trading are becoming central to the regulatory future of prediction markets in the U.S.