Polymarket is hiring an in‑house trading team to trade directly against customers, a move announced as the platform pursued a regulated re‑entry into the U.S. in late 2025. The decision raises immediate questions about market integrity and regulatory exposure amid a backdrop of a $1.4 million CFTC fine in 2022 and prior findings of inflated volumes. The firm recently acquired a CFTC‑licensed exchange for $112 million and received amended approval in November 2025, creating a fraught context for the in‑house trading model.
Polymarket conflict of interest and market integrity
Turning the platform operator into an active counterparty creates a clear conflict of interest: the operator retains control over matching and resolution mechanisms while deploying capital and algorithms that can profit from customer flows. That structural advantage can translate into preferential access to order‑book information and internal processes, increasing the risk of front‑running, strategic positioning and other behaviors that impair price discovery. Statistics professor Harry Crane warned that “this move could damage Polymarket’s identity”, arguing that platform odds may begin to reflect the operator’s incentives rather than aggregate trader beliefs.
History, regulatory context, and implications for users and compliance
Polymarket’s operational history intensifies the concern. Academic and industry analyses previously found substantial phantom activity on the platform: wash trading reportedly accounted for as much as 60% of reported activity in December 2024 and about 45% within sports markets, before falling to roughly 5% by May of the following year. (Wash trading is the practice of creating artificial trades to inflate reported volume.) An alleged insider trade that netted more than $1 million in 24 hours further underscores vulnerabilities tied to privileged access.
Regulators have already engaged the platform: a $1.4 million penalty from the Commodity Futures Trading Commission in 2022 led to a temporary U.S. customer block, and the platform has been blocklisted in jurisdictions including Switzerland, France, Belgium, Singapore and Poland. Polymarket’s purchase of a CFTC‑licensed exchange for $112 million and subsequent amended order approval in November 2025 represent significant regulatory progress now complicated by the in‑house trading model.
For liquidity providers and retail users, the most immediate risk is erosion of trust that can reduce participation and effective market depth. If counterparties perceive the house has informational or operational edges, capital rotation away from the platform can increase slippage and widen spreads—the very frictions the in‑house desk claims to solve. From a compliance perspective, the strategy resembles a sportsbook model that has already attracted legal scrutiny; increased regulatory attention or state‑level gambling challenges could follow, jeopardizing recent gains in formal authorization.
Polymarket’s in‑house trading plan is a calculated bid for tighter spreads and guaranteed liquidity but carries a parallel cost: intensified conflict‑of‑interest and regulatory risk that may undermine the platform’s core appeal as a neutral venue for collective forecasting. Next verified milestone: public disclosures or regulator feedback detailing safeguards for the in‑house desk and any operational firewalls intended to protect users; Related: Polymarket’s regulatory re‑entry and prior volume irregularities.