Polymarket has been recruiting new staff members for an internal market making team that could face off against customers on the company’s exchange, even though a similar feature has exposed its chief rival to criticism.
The New York-based prediction market startup has recently spoken to traders including sports bettors about joining the new unit, according to people familiar with the matter who asked not to be identified as the plans are private.
Polymarket declined to comment.
Polymarket and its main rival, Kalshi, have grown swiftly in recent months by offering customers exchanges where they can bet on the outcome of sports games, elections and other events. Both have received a green light from US federal regulators even as state officials argue that it amounts to illegal gambling.
The companies have presented themselves as neutral platforms where people with different opinions can meet and trade, in contrast to sports gambling companies that set the odds and benefit when customers lose.
Kalshi, though, already operates a unit like the one Polymarket is building, known as Kalshi Trading, which makes bids on the exchange, effectively taking the opposing side of some customer bets. Kalshi executives have said that this unit exists to create liquidity and improve the customer experience.
But critics have argued that the company’s market making efforts create conflicts of interests with customers and make Kalshi look like a traditional sportsbook. A proposed class action filed last month alleged that Kalshi Trading sets betting lines that put customers at a disadvantage.
“When consumers place bets on Kalshi, they face off against money provided by a sophisticated market maker on the other side of the ledger,” the complaint alleged.
Luana Lopes Lara, a co-founder of Kalshi, said on social media that the lawsuit is a “pure smear campaign.” She wrote that Kalshi Trading is not profitable and is given “no preferential access or treatment.”
Polymarket’s push to create its own market making unit comes as the company re-enters the US several years after being kicked offshore and paying a $1.4 million penalty in 2022 to settle allegations that it ran afoul of regulations.
Prediction markets match buyers with sellers on yes-or-no contracts and that makes them reliant on market makers willing to take on less popular trades.
Polymarket and Kalshi have both looked to attract outside traders to make markets on their exchange, offering incentives that reward heavy users who provide liquidity. A small number of financial trading firms, including Susquehanna International Group and Jump Trading, have begun serving as market makers on Kalshi.
The questions surrounding market making are part of a broader debate about prediction markets and how much they differ from old-fashioned gambling. In a public appearance last month, the founder of Polymarket, Shayne Coplan, called traditional sportsbooks a “scam” that “rip off the consumer.”
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