Polymarket hires in-house team to trade with customers — why this is a risk

Prediction market Polymarket is hiring an in-house market creation team to work directly with customers. This is a change that could blur the lines between prediction markets and traditional sportsbooks.

The company recently discussed building new desks with traders and sports bettors, Bloomberg reported, citing people familiar with the matter. The move follows a similar move by rival Kalsi, which has championed its own trading team as a way to improve liquidity and user experience.

In practice, however, it is entirely possible to employ outside market makers, raising questions about the true motivations of polymarkets. This decision appears to be more focused on generating revenue than improving the product.

“They don’t charge fees. They don’t make money. They want to find a way to monetize it,” said Harry Crane, a statistics professor at Rutgers University.

Crane said Polymarket plans to offer parlays through an RFQ protocol, set prices at an in-house desk and match those bets.

“These need to be backed by large sums of money and, if done correctly, can bring great benefits to the home,” he said. “I think that’s short-sighted and ultimately a mistake, but time will tell.”

Small revenue stream and huge risk

Klein also questioned the financial logic behind the strategy.

“Given the huge valuations, monetization is not a viable strategy if that’s the goal,” he said. “Assuming the trading desk is profitable, which it should be, the profits are tiny compared to its valuation.”

More importantly, Crane warned, companies can’t afford desks. too much make a profit.

“Companies shouldn’t want their in-house trading teams to make too much money, because that could create serious public relations issues and potentially legal issues,” he said. “Look at the class action lawsuit against Kalsi for doing the same thing. That lawsuit appears to be 100% frivolous, but the optics and PR are not positive.”

Mr Crane argued that beyond the legal risks, the move would undermine Polymarket’s strategic identity. “This reduces the opportunity for Polymarket to differentiate itself from its competitors and dedicates resources and focus to things that are critically different from what got the company here.”

Moving to a sportsbook model

This change makes Polymarket more similar to a sportsbook, allowing users to effectively trade with the house rather than with other bettors. At a sportsbook, prices are set and built energetically by in-house traders. Typically gives operators a 5% to 10% edge.

The expansion of polymarkets into this area can create conflicts of interest and worry the very bettors who participate in prediction markets. It wasn’t sports book. The market will no longer reflect the collective wisdom of traders, but instead the pricing decisions of Polymarket’s internal desks.

It also risks damaging Polymarket’s reputation as a barometer of real-world probabilities. That reputation was a key driver of the company’s rapid growth during the 2024 US election period, when news outlets regularly cited Polymarket alongside polling data, lending it mainstream legitimacy.

Blurring the lines and raising questions

Crane said sportsbook comparisons underestimate the problem.

“Aren’t the lines between prediction markets and traditional sportsbooks blurring? Yes, but it’s worse than that,” he said. “It’s well understood that in a sportsbook, the book is the trading partner and will use any information to gain an advantage over the customer. Exchanges are supposed to be different.”

“But as long as there are internal participants or privileged participants on an exchange, there will always be suspicions that they are reaping an unfair advantage,” Crane added, pointing to a recent controversy at NoVig that voided many winning bets because an internal market maker was a losing trade partner.

The introduction of in-house desks also raises operational and ethical issues reminiscent of the FTX-Alameda dynamic. How much order flow or deposit timing data does the desk have access to? Can it trade ahead of customer flow, or does it simply provide liquidity and collect spreads, as some exchanges claim?

Risks to brand and trust

While market making may create new revenue streams, the change threatens the perceived neutrality and trust that helped raise Polymarket’s profile. The company did not immediately respond to CoinDesk’s request for comment.

Fairness issues aside, Crane believes this strategy is simply wrong.

“It’s a bad business decision to take a platform that previously felt so novel and different and instead make it look and feel like every other platform,” he said.