Polymarket, a leading prediction market, is reportedly building an internal market-making team that could potentially bet directly against users in the market. This strategy, intended to improve liquidity, has inadvertently stepped into the legal and trust controversies facing its competitor Kalshi, including issues of neutrality such as conflicts of interest and odds manipulation. Meanwhile, the entry of whale and professional institutional market makers is reshaping the power balance in the prediction market.
Is Polymarket recruiting internal market makers to bet against users?
Bloomberg reports that Polymarket is actively recruiting members with professional trading experience to build an "internal market-making team" that will be able to place orders directly on the platform, take over unpopular or high-risk positions in the market, fill liquidity gaps, and stabilize market depth.
This move has shifted the prediction market platform from a matchmaker role to a more casino-like, traditional bookmaker model, drawing significant attention from the outside world.
In 2022, Polymarket was fined $1.4 million for violations and forced to withdraw from the U.S. market. Now it has regained regulatory approval and has been granted permission to return to the market.
A cautionary tale: Kalshi's insider market manipulation sparks class-action lawsuit, raising concerns about a conflict of interest.
Last week, Kalshi was embroiled in multiple lawsuits related to its market-making company, Kalshi Trading, with the company claiming the aim was to increase liquidity and improve user experience.
The class-action lawsuit alleges that the company manipulates market odds and puts users at a disadvantage due to information asymmetry when facing professional institutions as counterparties. The lawsuit argues that the company's model has deviated from its role as a neutral matchmaking platform and instead resembles a traditional but unlicensed sports betting company.
Despite Kalshi founder Luana Lopes Lara's denial that this was a smear campaign and his emphasis that internal market makers did not profit or receive any special treatment, the controversy has not subsided.
Polymarket neutrality faces challenges: Can whale and market makers absorb liquidity?
The Polymarket market has grown rapidly, but it has reportedly been highly dependent on whale and external market makers for liquidity.
Community leaks have revealed that wallet activities of major market makers such as Wintertermute and Jump Trading have been found to highly overlap with the platform's activities, raising concerns about the risk that a few players could dominate the overall situation.
However, the entry of more institutions has also brought new doubts to Polymarket, which originally focused on "collective wisdom" and "truth discovery engine": Is the platform still a neutral information market, or is it gradually evolving into another bookmaker that calculates odds?
The next watershed moment in prediction markets: financial instruments or gambling platforms?
With Polymarket and Kalshi obtaining regulatory approval in the United States, prediction markets are rapidly entering the mainstream. However, issues such as the role of market makers, whether platforms intervene in price formation, and whether specific traders have an informational advantage are challenging their core claim of collective wisdom.
For example, it was recently reported that a Google insider repeatedly used insider information to place bets on Polymarket, winning 22 out of 23 bets and earning $1 million in a single day.
Looking back, although the platform believes that market makers can ensure market liquidity and make transactions smoother, if they go astray, they may fall into a regulatory gray area again and undermine users' trust in their authenticity.
This article, which predicts that Polymarket is recruiting an internal market-making team to run a casino and act as the bookmaker, first appeared on ABMedia, a ABMedia .
