Polymarket rules have changed, how should airdrop participants respond?

Author: Chloe, ChainCatcher

Polymarket officially announced the updated "Market Integrity Rules" on March 23, which apply to both its DeFi platform and the U.S. exchange regulated by the CFTC. The new rules explicitly prohibit three types of insider trading behaviors and strengthen the framework for combating market manipulation. This policy adjustment did not come out of nowhere; it is a product of a series of controversies and public pressure, and it is also Polymarket's compliance self-rescue action before being impacted by mainstream U.S. financial regulation.

However, the new rules affect not only true insider players but also whether they more directly threaten the interests of the large number of users engaging in "profit-taking" or those professional arbitrageurs who truly provide liquidity.

The Pressure History Behind the Rule Upgrade: From the Venezuelan Coup to the Iran War

Looking back at the public and regulatory pressure Polymarket has faced over the past few months. In early January 2026, an anonymous user spent $32,537 on Polymarket betting that "Maduro will resign before January 31." Following Trump's announcement at 4:21 AM on Truth Social that Maduro had been arrested, the user immediately received a return of up to $436,000, with an investment return rate exceeding 13 times.

Investigations revealed that the account was only established in December 2025, and all betting targets were precisely aimed at the Venezuelan political situation, with the betting timing just hours before the event erupted. In response, Better Markets co-founder Dennis Kelleher pointed out that this transaction exhibits all the characteristics of insider trading: a newly created account, large funds, precise timing predictions, all occurring in an unregulated and opaque market.

Coincidentally, around the same time, suspicious trades regarding "the timing of U.S. military action against Iran" appeared on Polymarket, with some accounts accurately building positions just before U.S. military strikes, profiting hundreds of thousands of dollars.

Notably, Polymarket CEO Shayne Coplan once said in an interview with CBS News, "It's a good thing that insiders have an advantage in the market."

However, the reality is that in March 2026, Senator Adam Schiff and John Curtis jointly proposed bipartisan legislation aimed at banning trading contracts on prediction markets that are "similar to sports or casino games." The Commodity Futures Trading Commission (CFTC) also issued guidelines in the same month requiring prediction market platforms to take specific measures to prevent insider trading and encouraging exchanges to proactively consult with regulators when designing event contracts to identify "manipulation or price distortion risks."

The regulatory hunt has already formed, and Polymarket's policy upgrade is a proactive response to this hunt.

Dissecting the New Rules: Three Types of Prohibitions and a Multi-Layered Monitoring Framework

Polymarket officially released the updated market integrity rules on March 23, 2026, clearly delineating three red lines: first, trading based on stolen confidential information; second, trading based on illegal sources of information; third, trading involving influential outcomes.

In terms of market manipulation, the rules further explicitly prohibit spoofing, wash trading, fictitious transactions, and other behaviors. In response to these prohibitions, ChainX Society stated in an interview with ChainCatcher that the boundary between "wash trading" and normal trading lies in whether real value is generated and whether trading costs are borne. Wash trading is when the same group of people trades back and forth purely for data; whereas normal arbitrage or market-making involves placing limit orders at different price levels and bearing position risks, with each transaction being executed with real market users and standing up to scrutiny.

In terms of execution structure, Polymarket adopts a "multi-layered monitoring" design. On the DeFi platform side, all transactions are recorded on the Polygon chain, accessible for public review, and the platform collaborates with world-class monitoring technology firms for on-chain anomaly detection; once suspicious behavior is detected, possible sanctions include banning wallet addresses and referring users to law enforcement.

On the Polymarket US (CFTC-regulated exchange) side, monitoring is divided into three layers: external monitoring technology partners, real-time monitoring consoles, and a regulatory service agreement signed with the National Futures Association (NFA), which can directly initiate investigations and sanction violators, with sanctions including suspending qualifications, terminating accounts, monetary fines, or referral to regulatory authorities.

The Interests of Profit-Taking Users and the Dilemmas of Related Studios?

Polymarket's move is a heavy blow to "insider players," but it may spark different reactions from the profit-taking user group and related studios. In response to the new rules, the reactions of major players in the market are intriguing. Currently, ChainX Society, which has surpassed $200 million in historical trading volume on Polymarket, stated in an interview with ChainCatcher that the introduction of the new rules was expected and even long-awaited. They believe this is not a crackdown but a sign of market maturation. As early as when the platform began charging fees, professional teams had predicted that the future would involve charging the entire market and strengthening regulation.

For general users engaging in wash trading for airdrops, their past reliance on creating massive on-chain records and using dual accounts to trade against each other is now directly confronted by the new rules. Some players have even evolved to manipulate 100 wallets in a matrix or hedge between Polymarket and Kalshi, but the upgrade of the monitoring system has significantly increased the risks of such behaviors.

ChainX Society believes that truly high-quality strategies should not be "profit-taking" but rather genuine arbitrage. Arbitrage itself is the process of discovering price discrepancies and correcting market inefficiencies, which is a healthy behavior needed in prediction markets. As gray operations are squeezed out, the market will become cleaner, and the returns for professional arbitrageurs may actually increase.

The Liquidity Paradox: Are Profit-Taking Users Parasites or Infrastructure?

Additionally, behind this wave of regulations lies an unavoidable contradiction for Polymarket: the liquidity of Polymarket is not naturally formed. According to on-chain data, 80% of users on the platform place single bets of less than $500, with the average single bet amount over the past month being around $100, thus the true depth of the market is supported by a very small number of large traders and liquidity providers.

It is worth discussing whether the group of airdrop farmers who adopt "legitimate strategies" (such as providing two-way liquidity and cross-platform arbitrage) objectively play the role of informal market makers?

They narrow the bid-ask spread and enhance market capacity, allowing general users to build positions at more reasonable prices. On the other hand, from a business logic perspective, after Polymarket returns to the U.S. market, it urgently needs a massive amount of real transactions and deep data to prove the effectiveness of its market to the CFTC, which is crucial for obtaining further regulatory approval.

If the new rules are too aggressive and scare away this group of profit-taking users, a liquidity drought in the short term is almost inevitable, especially in niche markets where these farmers are often the only source of counterparty liquidity.

In this regard, ChainX Society stated that the platform should recognize the contributions of users who provide real liquidity. For example, in a multi-account system, if millions of dollars in trading volume are contributed daily, and all are maker limit orders, this is precisely what the platform mechanism encourages. Especially in events with low volatility and poor liquidity, these limit orders can provide depth to the market, allowing general users to execute trades. This behavior essentially exchanges capital and time for rebates while serving the market.

Under Regulatory Compliance, Do Related Studios Also Need Strategic Transformation?

It can be said that Polymarket's compliance process is not a temporary market fluctuation but a signal of the platform's strategic shift.

From acquiring the licensed exchange QCX to signing agreements with the NFA, all of this shows that prediction markets are moving closer to traditional financial regulation. In this highly transparent and regulated path, the survival space for traditional "low-quality wash trading" will only become narrower. ChainX Society believes that the new rules are actually beneficial for professional teams, and in the future, they will adopt three strategies: first, increase liquidity provision to seek more maker rebates; second, actively discuss deeper market-making solutions with the platform; third, continuously optimize strategies to enhance returns under compliance.

Overall, for studios that view Polymarket as a core profit source, now is a critical juncture to shift their strategic focus from "quantity" to "quality." Rather than manipulating 100 wallets for low-quality wash trading and risking precise identification and collective banning by the monitoring system, it is better to abandon the multi-wallet matrix and focus on managing a few high-quality accounts. Conducting in-depth trading through real market research or focusing on liquidity provision within the platform's regulations can not only effectively avoid the risk of bans but may also lead to better token airdrop allocations due to the contribution of real value in the final airdrop weighting calculations.