Prediction market Polymarket is within the strategy of hiring an inner market-making staff that can commerce immediately towards prospects — a shift that might blur the strains between a prediction market and a conventional sportsbook.
The corporate has just lately spoken to merchants and sports activities bettors about constructing the brand new desk, in accordance with Bloomberg, citing folks aware of the matter. The transfer follows an identical step by rival Kalshi, which has defended its personal in-house buying and selling staff as a method to enhance liquidity and the person expertise.
In apply, nevertheless, hiring exterior market makers is completely attainable, elevating questions on Polymarket’s true motivation. The choice seems centered much less on product enchancment and extra on producing income.
“They don’t cost charges. They don’t generate income. They need to discover a method to monetize,” Harry Crane, a statistics professor at Rutgers College, instructed CoinDesk.
Crane stated Polymarket plans to supply parlays by way of an RFQ protocol, with the in-house desk pricing and matching these bets.
“These require vital capital to again and likewise provide a considerable edge for the home if executed appropriately,” he stated. “I feel it’s short-sighted and in the end a mistake, however time will inform.”
A small income stream with outsized dangers
Crane additionally questioned the monetary logic behind the technique.
“Given the massive valuations, it’s not a viable technique to monetize, if that’s the target,” he stated. “Assuming the buying and selling desk is worthwhile — which is way from a given — the quantity it will possibly revenue is a pittance in comparison with its valuation.”
Extra importantly, Crane warned, the corporate can’t afford for the desk to be too worthwhile.
“The corporate shouldn’t need an in-house buying and selling staff to be too worthwhile, as that can create vital PR issues and attainable authorized points,” he stated. “Simply have a look at the class-action towards Kalshi for doing the identical. That lawsuit seems to be 100% frivolous, however the optics and PR will not be constructive.”
Past the authorized dangers, Crane argued the transfer undermines Polymarket’s strategic id. “This diminishes Polymarket’s alternative to distinguish itself from the competitors, and it dedicates sources and focus to one thing that’s definitively not what obtained the corporate thus far.”
A shift towards a sportsbook mannequin
This transformation makes Polymarket resemble a sportsbook, the place customers successfully commerce towards the home somewhat than different bettors. At a sportsbook, in-house merchants set costs and construct in vigorish — usually giving the operator a 5%–10% edge.
Polymarket’s foray into this territory may create a battle of curiosity and unsettle bettors who joined prediction markets exactly as a result of they weren’t sportsbooks. Markets would now not mirror the collective knowledge of merchants however as a substitute the pricing selections of Polymarket’s inner desk.
It additionally dangers eroding Polymarket’s popularity as a barometer of real-world possibilities. That popularity was a key engine of its speedy development through the 2024 U.S. election cycle, when information retailers routinely cited Polymarket alongside polling information, boosting its mainstream legitimacy.
Blurring strains and elevating questions
Crane stated the sportsbook comparability understates the issue.
“Does it blur the road between a prediction market and a conventional sportsbook? Sure, nevertheless it’s worse than that,” he stated. “At a sportsbook it’s effectively understood that the ebook is the counterparty, and can use no matter data it will possibly to get the sting over its prospects. Exchanges are speculated to be completely different.”
“However so long as there are in-house or privileged contributors on an trade, there’ll at all times be suspicions that they’re gaining an unfair benefit,” Crane added, pointing to a current controversy at NoVig, which voided numerous profitable bets as a result of its in-house market maker was the dropping counterparty.
The introduction of an inner desk additionally raises operational and moral questions harking back to the FTX-Alameda dynamic. How a lot order-flow or deposit-timing information will the desk have entry to? Might it commerce forward of buyer flows? Or will it merely publish liquidity and acquire unfold, as some exchanges declare?
A danger to model and belief
Whereas market making might create a brand new income stream, the shift threatens the perceived neutrality and belief that helped Polymarket rise to prominence. The corporate didn’t instantly reply to CoinDesk’s request for remark.
Setting apart questions of equity, Crane believes the technique is solely misguided.
“It’s a foul enterprise determination that takes a platform that beforehand felt very new and completely different and as a substitute makes it feel and look identical to everybody else,” he stated.
