Polymarket Deploys In-House Traders to Boost Liquidity Amid U.S. Expansion

Polymarket is preparing to introduce an in-house market-making team that will trade directly against users on its platform, according to reports. The New York-based prediction market firm has been recruiting traders, including those with experience in sports betting, to join the initiative as reported. This move aligns with a strategy already employed by Polymarket's primary competitor, Kalshi.

The development comes as Polymarket re-enters the U.S. market following regulatory challenges. In 2022, the company paid a $1.4 million penalty to the Commodity Futures Trading Commission to settle a case over regulatory compliance. Now, with a growing user base and $286 million in open interest, Polymarket is seeking to enhance liquidity by leveraging professional traders.

Kalshi, which already operates an in-house unit called Kalshi Trading, has faced criticism for trading against users and potentially skewing market outcomes. Polymarket's decision to follow a similar model has raised concerns about conflicts of interest and the platform's neutrality. Some users argue that having a platform trade against them undermines the core value proposition of prediction markets as engines of truth discovery.

Risks to the Outlook

Market makers can offer crucial liquidity by taking positions that might otherwise go unfilled, but they also introduce potential imbalances. On platforms like Polymarket, whales-users with large stakes already play a significant role in shaping outcomes. Critics worry that adding an in-house team could further concentrate influence and reduce the predictability of market behavior.

The issue of market integrity is especially sensitive in prediction markets, which rely on decentralized participation. The presence of professional traders could shift the dynamics, creating an environment where retail users face a structural disadvantage. This concern has been amplified by high-profile cases of alleged insider trading, such as the recent controversy over a trader who reportedly earned over $1 million in 24 hours with suspiciously accurate bets.

What This Means for Investors

Polymarket's move highlights the broader evolution of prediction markets as they attract more institutional and crypto-native participants. The firm has already secured partnerships with major players like Galaxy and is now expanding its reach through tokenized markets on Solana. These developments signal a shift toward a more structured, liquid market ecosystem.

However, the growth also brings regulatory scrutiny. Kalshi, for example, is currently facing a class-action lawsuit that alleges it misrepresents market dynamics and operates like an unlicensed sportsbook. Polymarket, while not yet facing similar legal challenges, may encounter similar issues as it scales and introduces new trading mechanisms.

For now, Polymarket remains in a strong position. Open interest has more than doubled in the past two months, and the platform is preparing for a U.S. launch via a closed beta on its iOS app. Investors and traders are watching closely to see whether the in-house market making will enhance liquidity or undermine the decentralized nature of prediction markets.