Polymarket Builds Internal Trading Team Amid US Expansion

Polymarket’s recent recruitment drive targets traders, including those with backgrounds in sports betting, to form a dedicated internal market-making team. According to the Bloomberg report, which cited people familiar with the discussions, this team may engage in trading activity directly on the Polymarket platform, potentially taking positions against other users. Market-making, which involves providing liquidity by continuously buying and selling assets, is a common practice in financial markets to ensure smooth trading. However, an internal team trading against a platform’s own user base introduces a potential conflict of interest, raising questions about market fairness and transparency. The company’s approach to this initiative will be closely watched as it seeks to scale its operations.

The decision to build this capability in-house comes as Polymarket actively expands its presence in the U.S. market. This expansion follows a period of regulatory challenges, most notably the 2022 case with the Commodity Futures Trading Commission. The resolution of that case, which involved a $1.4 million penalty, appears to have cleared a path for the company to pursue more aggressive growth strategies within the United States. The formation of an internal trading team could be seen as an effort to better control liquidity and trading dynamics on its platform as user numbers grow, though it inherently creates a scenario where the platform operator is also a direct participant in the markets it facilitates.

Polymarket’s latest move cannot be divorced from its recent regulatory history. The 2022 settlement with the Commodity Futures Trading Commission was a significant event, with the company paying a $1.4 million penalty. This action by the CFTC underscored the regulatory risks facing crypto-based prediction markets, which often operate in a gray area between financial trading, gambling, and novel event contracts. By resolving this case, Polymarket has ostensibly navigated a key hurdle, allowing it to focus on its U.S. expansion. However, the creation of an internal trading team that may trade against users could attract fresh regulatory attention, testing the boundaries of its current compliance framework.

Notably, Polymarket is not alone in employing such strategies. Its rival, Kalshi, is also facing regulatory scrutiny over similar market-making practices. This parallel situation highlights a broader trend and potential point of contention within the prediction market sector. Regulators are likely examining whether these internal trading activities could disadvantage retail users or manipulate market outcomes. The simultaneous scrutiny of Kalshi suggests that the Commodity Futures Trading Commission and other watchdogs are taking a concerted look at the operational models of these platforms. For Polymarket, expanding while a direct competitor is under the microscope presents both an opportunity and a risk, as its own practices will inevitably be compared and evaluated against the same standards.

The recruitment of traders, particularly from the sports betting world, signals Polymarket’s intent to blend financial market-making expertise with the nuanced, event-driven nature of prediction markets. Sports bettors are accustomed to analyzing odds, managing risk on discrete outcomes, and operating in fast-paced environments—skills that are directly transferable to market-making on a prediction platform. This talent strategy aims to build a team capable of dynamically providing liquidity across a wide array of markets, from politics and current events to finance and sports. The success of this internal team could be pivotal for user experience, as consistent liquidity is crucial for attracting and retaining traders on any platform.

Ultimately, Polymarket’s actions reflect the evolving and competitive landscape of crypto prediction markets. The push for U.S. expansion after regulatory settlement indicates a calculated bet on mainstream adoption. However, the decision to establish an internal market-making team that trades against users introduces complex questions about platform neutrality and conflicts of interest. How Polymarket manages this balance—and how regulators respond—will significantly influence its trajectory and the broader sector’s development. As the company moves forward, its experience may serve as a case study for how prediction market platforms can grow within the confines of U.S. financial regulation while implementing sophisticated, yet potentially contentious, internal trading operations.