BlockBeats report, April 15: The prediction market Polymarket has initiated a review of third-party startups in its Builders Program. Launched in November last year, the program allows external developers to build trading applications on Polymarket’s infrastructure, with approximately 200 developers currently enrolled, eligible for up to $2.5 million in funding and weekly rewards. The issue is that several of the top-volume developers in the program are all doing the same thing: creating copy-trading applications.
These apps identify trading accounts with unusually high win rates or flag suspiciously timed and anomalous transactions, allowing users to copy these trades with a single click. Kreo’s selling point is helping users “find insider traders before anyone else,” while Polycool directly features a “Polymarket Insider Trading Guide” on its website, stating, “This isn’t the stock market—using non-public information to place bets won’t land you in jail; the rules of decentralized prediction markets are entirely different.”
The Builders Program drove trading volume from $100 million in November last year to over $600 million in March this year, accounting for 16% of Polymarket’s total monthly trading volume. The founder of the copy-trading app PolyGun recently claimed that its weekly trading volume once reached 11% of Polymarket’s entire platform. However, security issues have also emerged: in February this year, PolyGun was exploited by hackers who stole approximately $70,000 in user funds, and another copy-trading app, Polycule, had previously been compromised for around $230,000. Most copy-trading apps are operated by anonymous teams and can only be contacted via Telegram. All three executives listed in PolyGun’s press release use pseudonyms, and the platform is primarily run by a single individual.
Concerns about insider trading extend beyond copy trading. On April 7, four user accounts on Polymarket profited $663,000 by betting on a ceasefire between the U.S. and Iran. Chain analysis firm Lookonchain found that all four accounts were created and funded on the same day, with no prior transaction history. Last month, Polymarket partnered with data analytics company Palantir to enhance compliance monitoring for sports betting and updated its rules to prohibit trades based on “stolen confidential information.” However, Polymarket does not require users to undergo identity verification, and many traders use VPNs to obscure their locations and frequently switch accounts, making enforcement significantly more challenging than at competitor Kalshi, which mandates user identity verification.
Polymarket's trading volume in March reached approximately $23 billion, a tenfold increase compared to the same period last year, and it is currently raising funds at a $20 billion valuation, up from a $9 billion valuation in October. Kalshi completed a funding round in March at a $20 billion valuation. Both platforms are facing scrutiny from legislators in multiple U.S. states, who argue that prediction markets effectively function as illegal gambling services that circumvent state laws.