- Polymarket is forming an in-house market-making team to trade directly with customers.
- This move shifts Polymarket closer to a sportsbook model where the house sets betting prices.
- Experts warn this could create conflicts of interest and damage the platform’s reputation for neutrality.
- The strategy aims to generate revenue but presents legal and public relations risks.
- The change may reduce Polymarket’s differentiation from competitors and challenge its role as a source of market-based probabilities.
Polymarket, a prediction market platform, is building an internal market-making desk to trade directly against its customers. This initiative, reported recently, involves discussions with traders and sports bettors about establishing the new desk as the company re-enters the U.S. market, according to people familiar with the matter.
This development follows a similar approach by rival Kalshi, which uses its own trading team to improve market liquidity and user experience. However, it remains possible for Polymarket to hire external market makers, raising questions about the motivation behind its decision. Analysts suggest the move’s goal focuses more on generating revenue rather than solely enhancing the product.
Statistics professor Harry Crane of Rutgers University explained that Polymarket plans to offer parlays—a type of bet involving multiple selections combined—using a request-for-quote protocol where the in-house desk will price and match bets. Crane noted, “These require significant capital to back and also offer a substantial edge for the house if executed correctly.” He further questioned the wisdom of the strategy, calling it “short-sighted and ultimately a mistake.”
Financially, Crane pointed out that even a profitable trading desk would contribute only a small portion of revenue compared to Polymarket‘s overall valuation. He also warned that the company must avoid having an overly profitable desk due to potential legal challenges and negative public perception. “Just look at the class-action against Kalshi for doing the same,” Crane said, referencing ongoing litigation against Kalshi that, while considered frivolous, has harmed its reputation.
The shift towards an internal trading desk aligns Polymarket more closely with sportsbooks, where operators act as the counterparty setting prices and embedding a built-in margin called vigorish (the bookmaker’s fee, commonly 5–10%). This raises conflict of interest concerns because market prices would reflect the internal desk’s decisions rather than the collective judgment of users.
Such changes risk undermining Polymarket‘s reputation as a reliable indicator of real-world probabilities, a role that boosted its profile during the 2024 U.S. election cycle through citations alongside polling data. The sportsbook comparison, Crane argued, is insufficient, explaining that sportsbooks openly act as counterparties, whereas exchanges like Polymarket are expected to be fair marketplaces. He highlighted a recent incident at NoVig, which voided winning bets due to conflicts involving its in-house market maker.
Additional concerns relate to operational and ethical issues reminiscent of situations like the FTX-Alameda case. Questions remain about the extent of order-flow or deposit-timing information accessible to the desk, potential for trading ahead of customers, and whether the desk will strictly provide liquidity by collecting spreads.
While the market-making desk could open a new revenue stream, the move risks damaging trust and neutral perception that were key to Polymarket‘s initial success. Crane summarized the approach as a poor business decision that could make Polymarket resemble its competitors rather than maintain its unique market position.
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