Polymarket Wants to Trade Against Its Users

In December 2025, reports emerged that Polymarket is exploring the creation of an in-house trading desk that would trade directly against users. Critics argue this transforms the platform from a neutral prediction market into something resembling a traditional sportsbook—with all the conflicts of interest that implies. If Polymarket becomes "the house," can traders still trust the platform to operate fairly?

What's Being Proposed

According to CoinDesk reporting, Polymarket is actively hiring for an internal market-making team. This team would:

• Provide liquidity: Act as counterparty to user trades when no other traders are available
• Take positions: Hold directional bets on market outcomes
• Earn spreads: Profit from the bid-ask spread on trades they facilitate
• Manage risk: Actively trade to hedge or build positions

While market-making is common on traditional exchanges, having the platform itself as a market maker—rather than independent third parties—raises serious concerns.

Why This Is Controversial

1. Conflict of Interest

When Polymarket trades against users, it profits when users lose. This creates a fundamental misalignment of incentives:

• The platform benefits from user losses, not just from facilitating trades
• Polymarket has access to all order flow data—they see what users are betting before executing
• They control market rules, resolution criteria, and can see aggregate positioning
• The house always knows more than individual players

2. Information Advantage

An in-house trading desk would have unprecedented visibility into:

• Order flow: See all pending orders before they execute
• Position data: Know exactly how users are positioned across all markets
• Whale activity: Identify large traders and their strategies in real-time
• Resolution timing: Potentially influence when and how markets resolve

This is why traditional exchanges separate market-making from exchange operations. The potential for abuse is too high when the same entity controls both.

3. From Prediction Market to Sportsbook

Statistics professor Harry Crane warned that this move transforms Polymarket's fundamental nature:

Sportsbooks are designed to profit from bettors. Prediction markets are supposed to aggregate information efficiently. These are fundamentally different purposes that become blurred when the platform takes the other side of trades.

Polymarket's Justification

Polymarket has defended the concept with several arguments:

Liquidity Provision

Many markets suffer from thin liquidity, making it hard for traders to enter or exit positions at fair prices. An internal market maker could:

• Tighten spreads in low-volume markets
• Provide depth for larger orders
• Enable trading in markets that would otherwise be illiquid
• Reduce slippage for users

Industry Standard

Polymarket points out that many exchanges have affiliated or internal market makers. Crypto exchanges like Binance and traditional venues like NYSE have designated market makers that provide liquidity.

Transparency on Blockchain

Since all trades occur on Polygon blockchain, Polymarket argues that their trading activity would be fully visible to anyone who wants to monitor it. There's no hidden order book—everything is on-chain.

Why These Arguments Fall Short

1. Independent vs. In-House Market Makers

There's a crucial difference between independent market makers and the exchange itself making markets:

• Independent MMs: Compete with each other, have no control over exchange rules, can be banned for abuse
• In-house MMs: Have exclusive access to platform data, control rules, can't be meaningfully regulated by themselves

2. Blockchain Transparency Isn't Enough

Yes, trades are visible on-chain—but Polymarket sees pending orders before they execute. By the time trades appear on blockchain, they've already happened. The advantage comes from seeing order flow first, not from hidden trading.

3. Regulatory Scrutiny

With fresh CFTC approval, Polymarket is under heightened regulatory attention. Proprietary trading by exchanges is heavily restricted in traditional finance for exactly these conflict-of-interest reasons.

What This Means for Traders

Potential Downsides

• Worse execution: Platform could front-run large orders it sees coming
• Manipulated odds: In-house desk could move prices before major events
• Resolution bias: Platform profits from certain outcomes may influence resolution
• Trust erosion: Harder to believe markets are fair when platform is counterparty

Potential Upsides

• Better liquidity: Tighter spreads, especially in smaller markets
• Faster execution: Always a counterparty available
• More markets: Could enable markets that lack organic liquidity

How to Adapt Your Strategy

1. Avoid Large Single Orders

If the platform sees large orders before execution, consider breaking positions into smaller chunks over time. This reduces the risk of being front-run.

2. Watch for Suspicious Price Movements

Use PolyTrack to monitor unusual price movements before major events. If odds shift significantly without public news, it could indicate informed trading—potentially by the platform itself.

3. Compare with Other Platforms

Check odds on Kalshi and other prediction markets. If Polymarket odds diverge significantly without explanation, it might indicate market-making activity affecting prices.

4. Focus on High-Liquidity Markets

In markets with many organic participants, an in-house desk has less impact. Stick to high-volume markets where independent whale traders dominate.

5. Consider Alternatives

If trust becomes a major concern, platforms like Kalshi don't operate proprietary trading desks. Diversifying across platforms reduces exposure to any single platform's potential conflicts.

Industry Reactions

The prediction market community has been divided:

Critics

• This fundamentally changes what Polymarket is
• Users can't compete against the house with perfect information
• Trust is the foundation of prediction markets—this destroys it
• Regulators should block this before it starts

Defenders

• Liquidity is the bigger problem—thin markets hurt everyone
• On-chain transparency prevents hidden abuse
• Users can still trade against each other; the desk just provides backup liquidity
• If it improves the trading experience, it's worth it

Key Takeaways

• Polymarket is exploring an in-house trading desk that would trade against users
• Critics say this creates sportsbook-like conflicts of interest
• The platform would have information advantages over all traders
• Defenders argue it solves liquidity problems in thin markets
• Regulatory implications are significant given recent CFTC approval
• Traders should adapt strategies to account for potential platform trading