Polymarket Plans In-House Trading Team to Compete Against Users

Polymarket, the world’s largest prediction market platform, is building an internal trading team that will bet directly against its own users.

This major shift could change how the platform operates and raises questions about fairness and trust.

Bloomberg Reports Hiring Push

According to a Bloomberg report, Polymarket has been recruiting traders and sports bettors for an internal market-making unit. The company approached various professionals about joining this new team as it expands back into the U.S. market.

The timing is significant. Polymarket received regulatory approval to operate in the United States on Tuesday after being banned in 2022. The Commodity Futures Trading Commission had fined the company $1.4 million for operating without proper registration.

Unlike traditional prediction markets where users bet against each other, this new system would have Polymarket’s own traders taking the opposite side of user bets. This makes the platform more like a traditional sportsbook where the house sets odds and profits when customers lose.

Revenue Strategy Behind the Move

Polymarket currently doesn’t charge trading fees, which means it makes little money despite its massive growth. The platform saw its valuation jump to $9 billion after receiving a $2 billion investment from Intercontinental Exchange, the company that owns the New York Stock Exchange.

The company also plans to offer parlay betting, where users can combine multiple bets into one. Crane says Polymarket would use a special system called RFQ (request for quote) protocol, with their internal desk setting prices for these complex bets. This would give the company a significant edge if done correctly.

Following Competitor’s Controversial Model

Polymarket isn’t the first to try this approach. Its main competitor, Kalshi, already operates an internal trading unit called “Kalshi Trading.” However, this has created problems for Kalshi.

Users have criticized Kalshi’s internal trading, claiming it puts customers at a disadvantage. A proposed class-action lawsuit filed last month alleges that Kalshi Trading “sets betting lines that disadvantage customers” and forces users to compete against “a sophisticated market maker.”

Both platforms have also worked with external companies to provide liquidity. Financial trading firms like Susquehanna International Group serve as market makers on Kalshi, while Jump Trading is active on Polymarket. Galaxy Digital is also reportedly in talks with both platforms about becoming a liquidity provider.

Expert Warnings About Trust and Reputation

Professor Crane warns that this strategy could backfire for Polymarket. He questions whether the profits would be worth the risks, especially given the company’s high valuation.

“Given the huge valuations, it’s not a viable strategy to monetize,” Crane said. “The amount it can profit is a pittance compared to its valuation.”

More importantly, Crane believes the company can’t afford for this trading desk to be too profitable. “The company should not want an in-house trading team to be too profitable, as that will create significant PR problems and possible legal issues,” he explained.

The biggest concern is trust. During the 2024 presidential election, news outlets regularly cited Polymarket’s odds alongside traditional polls. The platform built its reputation as a neutral source that reflected real market sentiment, not house-set prices.

“At a sportsbook it is well understood that the book is the counterparty,” Crane noted. “Exchanges are supposed to be different.”

Crane also pointed to a recent controversy at NoVig, another prediction platform, which voided winning bets because its in-house market maker was on the losing side. This highlights the potential conflicts that arise when platforms trade against their own users.

Market Growth Drives Changes

The prediction market industry has exploded recently. In the third quarter of 2024, the three largest platforms saw combined trading volume jump 565% to $3.1 billion, up from $463.3 million in the previous quarter.

Polymarket’s open interest has doubled to $286 million in just two months, with over 494,000 active traders in November alone. The platform gained massive attention during the 2024 election when it correctly predicted Donald Trump’s victory while many traditional polls suggested a closer race.

However, some industry leaders support the idea of internal trading. Coinbase CEO Brian Armstrong argued at The New York Times’ DealBook Summit that prediction markets’ trading desks could actually improve accuracy. He said having traders with “really good information” would provide “a higher quality signal” for the 99% of people trying to understand what might happen in the world.

The Road Ahead: Balancing Profit and Principles

Polymarket faces a challenging decision. The company needs revenue streams to justify its massive valuation, but changing its core model risks alienating users who joined specifically because it wasn’t a traditional sportsbook.

The irony isn’t lost on critics. Polymarket founder Shayne Coplan has publicly criticized traditional sportsbooks, calling them a “scam” that “rip off the consumer” because users can only trade against the house. Now his company appears to be moving toward a similar model.

The platform hasn’t confirmed when this internal trading team might launch or responded to requests for comment about the plans. As Polymarket prepares its full U.S. launch through its iOS app’s closed beta, users and critics will be watching closely to see if the company prioritizes short-term profits over long-term trust.

For now, the debate continues about whether prediction markets can maintain their reputation as neutral information sources while simultaneously competing against their own users for profits.