Kalshi and Polymarket, two of the biggest names in prediction markets, announced new market integrity measures on Monday. The decision by the event contract exchanges to spell out their rules even more explicitly comes as the industry faces growing pressure over insider trading, manipulation, and the credibility of contracts tied to sports and politics.
As the platforms face increased scrutiny on Capitol Hill following public outcry over a series of suspiciously well-timed trades tied to U.S. military action in Iran and Venezuela, the move appears to be an effort to show they’re taking responsibility for policing their markets seriously and have the tools in place to do so.
The responsibility to protect their markets isn’t voluntary. Commodity Futures Trading Commission (CFTC)-regulated exchanges, known as designated contract markets, are expected to act as frontline watchdogs, monitoring trading activity and enforcing their own rules under the commission’s oversight.
In an interview with CasinoBeats last month, former CFTC regulator Carl Kennedy explained why prediction markets have been given this authority.
“The CFTC is a mighty strong agency, but it’s a few people,” Kennedy said, explaining that Congress gave the commission authority to empower exchanges “to essentially help the agency to regulate these markets.” In CFTC markets, he said, “each exchange is its own regulator… deputized by the CFTC to police your own market.”
Kalshi Adds Preemptive Blocks for Candidates & Athletes
Kalshi hasn’t shied away from confronting the issue of insider trading on its platform in recent months. In February, the company outlined an aggressive strategy to combat insider trading, including using its in-house Poirot system to detect unusual trading patterns and partnering with Solidus Labs to add behavioral monitoring tools to its platform.
In its March 23 announcement, Kalshi said it’s expanding its internal controls with “new technological guardrails” designed to preemptively block politicians, athletes, and other relevant insiders from trading in certain political and sports markets.
The company said the changes have been in the works for months and are meant to “proactively” address recent CFTC and congressional proposals focused on insider trading and manipulation.
One of the changes is a new screening system designed to keep political candidates from trading on their own races. In its statement, the exchange referenced an enforcement action it took against former California gubernatorial candidate Kyle Langford, who it said traded on his chances of being elected, in violation of Kalshi’s rules.
While Kalshi said it has always blocked elected officials from trading on their own campaigns, the latest update takes that a step further by adding built-in checks to stop candidates from even placing those trades in the first place.
It also said college and professional sports participants, including athletes, personnel, and referees, will be blocked from trading in affiliated league markets through screening lists developed with IC360.
The prediction market has also added a whistleblower tool directly to its market pages, allowing users to flag suspicious activity.
“Prediction markets only work when users trust them,” the company said. “Ensuring market integrity is not just a goal – it is a cornerstone of our business model.”
Polymarket Updates Rules Across DeFi and U.S. Exchange
Up until now, Polymarket hasn’t said much about insider trading on its platform. In fact, when it has addressed the issue, its president, Shayne Coplan, has been dismissive of concerns and even suggested that insider trading is cool and could benefit prediction markets.
However, with its latest announcement, it appears Polymarket is finally feeling the heat and has decided to clarify how its market integrity rules apply across both its offshore DeFi platform and its CFTC-regulated U.S. exchange.
In a press release, the company said its updated governing documents now more clearly prohibit three categories of insider trading: trading on stolen confidential information, trading on illegal tips, and trading by people who can influence an event’s outcome.
Polymarket also highlighted its broader anti-manipulation prohibitions, including bans on spoofing, wash trading, fictitious transactions, front-running, and other disruptive practices. It said surveillance on the platform operates at three levels, including a control desk and a Regulatory Services Agreement with the National Futures Association.
“Markets thrive on clarity,” Chief Legal Officer Neal Kumar said. “These rule enhancements make our expectations abundantly clear for every participant across both platforms.”
Suspicious Trades Helped Force the Issue
The announcements from the two prediction market giants follow several high-profile incidents involving trades whose timing seemed too good to be true.
In January, newly created Polymarket wallets placed bets on Nicolás Maduro’s removal in the hours leading up to his capture by U.S. armed forces. The wallets netted more than $600,000 combined, according to publicly available data about the trades.
In February, traders on Polymarket once again raised eyebrows after well-timed bets on whether the U.S. would strike Iran by February 28, 2026, generating large profits, before there was any public confirmation of the joint U.S.-Israeli operation.
Those cases and others have fueled a legislative push on Capitol Hill to rein in prediction markets. Rep. Ritchie Torres (D-NY) was the first member of Congress to introduce legislation to stamp out insider trading on prediction markets with the Public Integrity in Financial Prediction Markets Act of 2026.
Torres’ bill would make it illegal for a “covered individual” to trade prediction market contracts if they “possess material nonpublic information” or “may reasonably obtain such material nonpublic information in the course of performing official duties.”
Since Torres introduced his legislation, other lawmakers have followed suit. Sens. Jeff Merkley (D-OR) and Amy Klobuchar (D-MN) later introduced the End Prediction Market Corruption Act, which would bar the president, vice president, members of Congress, and certain senior executive branch officials from trading event contracts.
Sen. Richard Blumenthal (D-CT) introduced the Prediction Markets Security and Integrity Act of 2026 with Sen. Andy Kim (D-NJ), which would prohibit the use of material, nonpublic information for private gain and require prediction markets to publish rules to prevent manipulation and deceptive practices.
While CFTC-regulated platforms in the U.S. have been caught in the crossfire over insider trading, it’s important to note that the most controversial trades took place on Polymarket’s offshore platform. Still, Monday’s announcements from both companies make clear that they’re trying to get out in front of the integrity problem as scrutiny of these platforms increases.
