Polymarket hires Chainalysis for on-chain insider-trade detection

Polymarket announced Thursday that it selected blockchain analytics firm Chainalysis to provide an on-chain market integrity solution to monitor trading activity and enforce platform rules. The company described the detection model as “designed to surface patterns consistent with insider knowledge in prediction markets,” and said the tools will identify and escalate suspicious behavior for review.

Under the agreement, Chainalysis will integrate on-chain detection into Polymarket’s existing controls. The service will provide continuous surveillance of transactions, help trace the origin of funds and supply alerts to support enforcement when platform rules appear to be breached.

The partnership follows incidents in which traders appeared to profit from non-public or potentially manipulated information tied to real-world events. In April, federal prosecutors charged a U.S. service member with using classified information to place large, winning bets on the predicted capture of a foreign leader. Those events increased scrutiny of prediction-market trading and prompted Polymarket to tighten safeguards.

Polymarket has recently added trading limits and extra monitoring steps. The company said the Chainalysis model will supplement those measures by detecting anomalous on-chain patterns and escalating cases for further review. Polymarket did not disclose specific enforcement procedures or how often the system will generate alerts.

Prediction markets have grown in volume and scope. A recent industry report found monthly trading volumes reached $25.7 billion in March, with retail users accounting for much of the activity and a movement toward sustained engagement in sports and event-based markets.

Regulators are increasing attention to these platforms. New York state has filed lawsuits against some exchange operators alleging violations of state gambling laws, and federal agencies are reviewing cases that involve potential misuse of inside information. Market participants have flagged regulatory uncertainty as an operational concern.

Chainalysis provides blockchain tracing and analytics to exchanges, law enforcement agencies and financial institutions. Representatives from both firms characterized the collaboration as intended to improve transparency around trading activity and to reduce the risk that insiders exploit non-public information for financial gain.