Prediction market platform Polymarket is set to launch an on-chain market integrity monitoring solution that seeks to detect cases of insider trading and manipulation within its decentralized finance markets.
The system, announced on Thursday, will be developed in collaboration with analytical firm Chainalysis and will provide insight into the whole DeFi transaction lifecycle on Polymarket. Market manipulation and insider trading would be the main focal point of the new roll-out in order to make the trading in Polymarket more credible.
The development comes against the backdrop of the current trend involving insider trading in the prediction market amid increasing worries over the abuse of confidential and material information.
How will the surveillance take place?
Polymarket in its press release highlights that all activities on their network have always occurred within a public blockchain. Therefore, everything done is already visible and traceable making it easy for a higher level of surveillance. The idea behind implementing the new framework lies in the public blockchain mechanism.
The platform also says that more features will be included that will monitor and analyze activities further effectively, helping to identify cases of potential manipulation.
These include the ability to identify traders who open very big accounts shortly before critical events happen on the blockchain, and any instances of market distortion through such techniques as wash trading.
The platform is leveraging the transparency aspect of the blockchain system to ensure that all manipulative acts are detected and dealt with accordingly.
The company also says the partnership with Chainalysis isn’t just about keeping things in check internally, but also about making the platform more useful for outside parties like regulators and law enforcement.
Since all activity on Polymarket already sits on a public blockchain, the enhanced monitoring is expected to turn the transparency into something actionable.
Additionally, the new rollout could also influence market peers to follow suit. It could also make it easier for authorities to trace suspicious activity and carry out investigations faster and more effectively.
Polymarket focuses on compliance after previous hiccups
The platform has argued that the new rollout could help set a new standard for how prediction markets operate, especially when it comes to compliance. Instead of being seen as loosely regulated or hard to monitor, the platform wants to position itself as an example of how fully transparent, auditable markets can work in real time.
Founder and CEO Shayne Coplan has said that transparency has been a core part of the platform from the beginning. In his view, prediction markets can only attract serious traders and institutional players if people trust that activity is visible and properly monitored.
In addition, he expects that the partnership will bolster the reputation of Polymarket as a credible provider of insights on the market, particularly now that the predictions made on the exchange have started affecting the wider narrative in the financial world, including stocks, interest rates, and popular cryptocurrencies such as Bitcoin and Ethereum.
Interestingly, the new rollout comes after Polymarket has previously managed to settle the legal issue that arose when the CFTC accused it of offering illegal unregistered binary options contracts in the United States in 2022.
Since then, the trading platform has tried to restructure itself by introducing a version of the website that is regulated in the United States and even exploring the possibility of reintroducing its site in the American market again.
Furthermore, regulatory pressure surrounding prediction markets has been escalating recently. In a new development, the United States Department of Justice has arrested and filed charges against an active-duty U.S. Army soldier for allegedly using non-public, confidential information to trade on the prediction exchange before news about the capture of the former president of Venezuela, Nicolás Maduro, came out.
With the pressurising background, Polymarket’s move can likely help the platform gain regulatory trust and stay in business despite previously being accused of turning a blind eye towards mal-practice.
