Polymarket has selected Chainalysis to power a novel fully on-chain market integrity monitoring system aimed at detecting insider trading and market manipulation across its prediction markets. The solution, described by the platform as a first-of-its-kind, leverages the transparency of blockchain records to identify suspicious patterns in real time.
In the announcement, Polymarket stated that because "every trade, position, and settlement is recorded on a public blockchain," that transparency can now "be harnessed to set a new public standard for market integrity in prediction markets and beyond." Chainalysis will provide anomaly detection tailored to patterns "consistent with insider knowledge in prediction markets."
Chainalysis System Targets Insider Trading On-Chain
The partnership spans multiple Chainalysis product lines, including investigative tools to create "blockchain-verified evidence for proactive and reactive engagement with law enforcement," on-chain threat prevention, and professional services to develop new detection capabilities as abuse patterns evolve. Polymarket sent a blunt message: the enhanced monitoring "sends a clear signal: insider trading, in addition to all types of fraud and market manipulation, is not welcome on Polymarket, and those who attempt it will be identified." The platform aims to serve as a test case for what market integrity can look like in a fully on-chain world.
This deployment builds on a March update when Polymarket published enhanced Market Integrity Rules and highlighted a multi-layered monitoring system on its Polygon-based DeFi venue. All holders and positions in each contract are publicly viewable, and suspicious activity can trigger reviews, bans, and referrals to law enforcement.
Platform Upgrade and pUSD Stablecoin Launch
The integrity rollout follows Polymarket's April 28 exchange stack upgrade, described internally as its most significant overhaul to date. It introduced CTF Exchange V2 smart contracts, a rewritten central limit order book engine, and Polymarket USD (pUSD) as a new collateral token. According to documentation, pUSD is "a standard ERC-20 token on Polygon, backed 1:1 by USDC," with enforcement "onchain by the smart contract — no algorithmic peg, no fractional reserve." All trading still settles in native USDC to improve capital efficiency.
The platform is migrating off bridged USDC.e toward pUSD issued directly against Circle's USDC, a shift designed to cut failed trades, lower gas costs, and improve order management. Most users are handled automatically via a one-time approval prompt, while API traders must reconfigure clients for the new contracts.
The infrastructure push comes amid explosive volume growth: a new all-time daily volume record of about $425 million on February 28, surpassing the prior high from the 2024 U.S. election, while February's total volume topped $7 billion — roughly a 7.5x year-over-year jump. Regulatory and compliance pressure around prediction markets has intensified as well, with platforms now outlining fresh insider trading controls and governance restrictions to pave the way for institutional participation. Polymarket's partnership with Chainalysis marks a shift from passive transparency to active, enforceable surveillance, setting a potential compliance benchmark for the entire crypto prediction sector.