Polymarket Reviewing Its Developer Program, Multiple Copycat Apps Publicly Teaching Users to "Front-Run"
BlockBeats News, April 15th, Prediction market Polymarket has initiated a review of third-party startups in its Builders Program. The program, launched in November last year, allows external developers to build trading apps on the Polymarket infrastructure, with approximately 200 developers currently onboarded, eligible for up to $2.5 million in funding and weekly rewards. The issue is that the highest-volume developers in the program are all doing the same thing: copy-trading applications.
These applications curate trading accounts with abnormally high win rates for users or flag suspicious timing or unusual amounts in trades, assisting users in copying these trades with one click. Kreo's selling point is to help users "find insider traders earlier than others," while Polycool directly features an "Insider Trading Guide for Polymarket" on its official website, stating, "This is not the stock market, betting with non-public information will not land you in jail, the rules of decentralized prediction markets are completely different."
The trading volume brought by the Builders Program has surged 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 accounted for 11% of Polymarket's platform-wide volume. However, security issues have also been exposed. In February this year, PolyGun was exploited by hackers using a code vulnerability to steal about $70,000 in user funds, while another copy-trading app, Polycule, was previously hacked for around $230,000. Most copy-trading apps are operated by anonymous teams and can only be contacted via Telegram. PolyGun's three executives listed in the press release all use pseudonyms, with the operation mainly run by one person.
The concerns of insider trading extend beyond copy-trading. On April 7th, four user accounts bet on the US-Iran ceasefire and earned $663,000, blockchain analysis company Lookonchain found that these four accounts were all created and funded on the same day, with no prior transaction records. Last month, Polymarket partnered with data analytics firm Palantir to enhance compliance monitoring for sports betting and updated rules to prohibit trades based on "stolen confidential information." However, Polymarket does not require user KYC, and many traders mask their locations through VPNs and frequently switch accounts, making enforcement much more difficult than its competitor Kalshi (which mandates user verification).
Polymarket had a trading volume of around $23 billion in March, a tenfold increase from the same period last year, and is currently in the process of raising $2 billion at a valuation of $20 billion, previously valued at $9 billion in October. Kalshi raised funds with a valuation of $22 billion in March. Both platforms are facing scrutiny from legislators in multiple US states, who believe that prediction markets are essentially illegal gambling services that circumvent state laws.
