BlockBeats News, April 15th, Prediction market Polymarket has initiated a review of third-party startups in its Builders Program. The program was launched in November last year, allowing external developers to build trading apps on the Polymarket infrastructure. Currently, about 200 developers have joined, eligible for up to $2.5 million in funding and weekly rewards. The issue lies in the fact that the top trading developers in the program are all doing the same thing: copy-trading apps.
These apps curate trading accounts with abnormally high win rates for users or flag suspicious timing and unusual amounts in trades, enabling users to copy these trades with one click. Kreo’s selling point is to help users “find insider traders earlier than others,” while Polycool directly displays an “Insider Trading Guide for Polymarket” on its official website, stating, “This is not the stock market, betting with non-public information will not land you in jail, the rules of decentralized prediction markets are completely different.”
The trading volume brought by the Builders Program has surged from $100 million in November last year to over $600 million in March this year, accounting for 16% of Polymarket’s total monthly transaction volume. The founder of the copy-trading app PolyGun recently claimed that its weekly trading volume once accounted for 11% of Polymarket’s entire platform. However, security issues have also been exposed. In February this year, PolyGun was hacked using a code vulnerability to steal around $70,000 of user funds, while another copy-trading app, Polycule, was previously hacked for around $230,000. Most copy-trading apps are operated by anonymous teams and can only be contacted via Telegram. The three executives listed by PolyGun in its press release all use aliases, with the operation mainly handled by one person.
The suspicions of insider trading are not limited to copy-trading. On April 7th, four user accounts bet on the U.S.-Iran ceasefire and earned $663,000. Blockchain analysis company Lookonchain found that these four accounts were all created and funded on the same day, with no prior transaction records. Polymarket collaborated with data analysis company Palantir last month to enhance compliance monitoring for sports betting and updated rules to prohibit trades based on “stolen confidential information.” However, Polymarket does not require user verification, and many traders use VPNs to conceal their location and frequently switch accounts, making enforcement much more challenging than its competitor Kalshi (which mandates user authentication).
Polymarket had a trading volume of around $23 billion in March, a tenfold increase from the same period last year, and is currently raising funding at a valuation of $20 billion, up from $9 billion in October. Kalshi raised funding in March at a valuation of $22 billion. Both platforms are facing scrutiny from lawmakers in multiple U.S. states, who believe that prediction markets are essentially illegal gambling services bypassing state laws.
