Polymarket taps Chainalysis for on-chain surveillance to hunt down insider trading
Polymarket partners with Chainalysis to implement on-chain surveillance targeting insider trading and fraud as volumes reach $7B monthly and law enforcement grows.
Summary
- Polymarket has selected Chainalysis to power its first ever, fully integrated market integrity monitoring system aimed at detecting insider trading and market manipulation across its forecast markets.
- The release comes two days after the April 28 Polymarket exchange upgrade, which introduced new smart contracts, a redesigned order book, and pUSD, an ERC-20 security token on Polygon backed 1:1 by USDC.
- Record trading volumes – including a one-day high of $425 million and a total of more than $7 billion this year – are driving institutional-level monitoring and tracking.
Polymarket has partnered with Chainalysis to release what it calls a “first-of-its-kind solution for monitoring trading activity and enforcing Market Integrity Rules” across the entire DeFi prediction market platform, formalizing a monitoring layer specifically designed to identify insider trading, fraud, and manipulation in real time.
In the announcement, Polymarket said that because “all trades, positions, and solutions are recorded on the public blockchain,” that light can now “be used to set a new public level of market integrity in the prediction markets and beyond,” with Chainalysis providing unmistakable discovery targeting patterns “corresponding to insider knowledge of the prediction markets.”
The Chainalysis program targets intra-chain transactions
The agreement covers many of Chainalysis’ product lines, including investigative tools to create “blockchain-verified evidence for strong and effective interactions with law enforcement,” to prevent on-chain threats, and professional services “to develop new capabilities to detect and support complex investigations” as new abuse patterns emerge.
Polymarket put the message bluntly, saying that the enhanced monitoring “sends a clear signal: insider trading, in addition to all forms of fraud and market manipulation, is not acceptable to Polymarket, and those who try will be identified,” setting the stage as a test of “what market integrity can look like in a world full of chains.”
Chainalysis’ deployment builds on a March update in which Polymarket published improved Market Integrity Rules and highlighted a “multi-layered monitoring system” on its Polygon-based DeFi platform, where all owners of each contract and their positions are publicly visible and suspicious activity can trigger reviews, bans, and referrals from law enforcement.
Develop, volumes, and pUSD collateral
The integrity release follows Polymarket’s April 28 exchange stack upgrade, described internally as “the most significant overhaul” to date, which introduced CTF Exchange V2 smart contracts, a rewritten centralized order book engine, and Polymarket USD (pUSD) as a new collateral token.
According to Polymarket’s documentation, pUSD is “an ERC-20 token common to Polygon, backed 1:1 by USDC,” with support “enforced onchain by smart contract – no algorithmic peg, no fractional share,” while all trades remain in native USDC to improve financial efficiency in the settlement.
The platform is from USDC.e on the bridge towards pUSD issued directly against Circle’s USDC, the shift Polymarket says is designed to reduce failed trades, lower gas costs, and improve order management, with multiple users handled automatically with a one-time approval notification and API traders needed to readjust clients for new contracts.
This infrastructure pressure is due to explosive growth: Polymarket set a new record of daily volume of approximately $425 million on February 28, surpassing its previous value in the US elections of 2024, and the total in February reached $7 billion – almost a year-on-year jump of 7.5x, according to on-chain analytics research cited by many research firms.
The pressure to regulate and comply with speculative markets is also increasing, as the latest analysis notes that by the beginning of 2026, platforms such as Polymarket and Kalshi have been introducing new internal trading controls and management restrictions as the wider sector reaches approximately 21 billion dollars per month, making strong monitoring of the institutional sector a priority.
