Polymarket’s plan to staff an in-house trading desk to trade against customers raises immediate conflict-of-interest and market-integrity concerns, with measurable signs already visible in platform metrics and its regulatory record. The move intersects with prior findings that at times more than 60% of reported volume in certain markets was linked to wash trading, a figure later reported to have fallen to roughly 5% by May. Polymarket hiring an in-house trading team places the operator in the role of counterparty to its users, concentrating privileged order-flow and platform knowledge and altering incentives that underpin user participation and perceived fairness.
Conflict of interest and informational asymmetries
Running a proprietary desk within the platform creates a persistent information asymmetry: staff managing listings, resolution timelines or order routing will have non-public visibility into aggregated user positions and timing. That vantage point can enable frontrunning or advantaged positioning relative to retail participants. A high-profile example previously cited on the platform involved a roughly $1 million profit on Google-related bets tied to alleged insider access, illustrating how information leakage in a pseudonymous market can be weaponized. Concentrating trading capital and signal access inside the operator converts neutral market infrastructure into an active market player, undermining the level playing field essential for credible probability discovery.
Market integrity, wash trading and data signal quality
Wash trading is the deliberate creation of artificial volume by trading with oneself; it obscures true liquidity and degrades price signals. Historical analysis flagged substantial artificial activity on the platform, and subsequent reductions do not eliminate the structural vulnerability. An internal desk with scale can generate sophisticated patterns of synthetic activity that are harder to detect than simple wash trades, eroding the reliability of market data used by participants and analysts. For prediction markets, degraded signal quality diminishes the product’s primary utility: aggregating independent probabilities into actionable insight.
Regulatory, operational and systemic risks
Polymarket’s regulatory history includes a US enforcement action that resulted in a $1.4 million fine and a later path back into US access via an amended designation and potential acquisition activity referenced at approximately $112 million. Reintroducing an internal trading arm is likely to invite renewed scrutiny from market supervisors focused on conflicts of interest and consumer protection. Operationally, running a desk requires specialist hiring, advanced trading systems, compliance controls and costly auditing; these are non-trivial capital and governance commitments that can divert resources from core market infrastructure. If the in-house team assumes large positions in thin markets and those positions move against the platform, the result could be liquidity stress or solvency pressure that cascades to customer payouts and overall platform stability.
Mitigations such as strict information firewalls, independent oversight committees and public disclosure of trading activity are listed options, but their effectiveness is limited in fast-moving, pseudonymous environments and would require substantial monitoring and audit overhead. Alternatives that preserve neutrality include outsourcing liquidity to independent market makers or maintaining a pure peer-to-peer matching model.
Turning the operator into an active market participant shifts Polymarket’s architecture from neutral matcher to stakeholder, with predictable impacts on signal quality, regulatory exposure and operational complexity. The next verified milestone to watch is whether the platform publishes concrete, auditable controls and third‑party reviews of internal trading activity or faces renewed enforcement inquiries.
