Polymarket has begun auditing several third-party startups that let users copy the activity of top traders, in an effort to limit potential insider trading on its decentralized prediction markets.
The move follows reports that some tools built on Polymarket’s infrastructure were offering access to trading data that may have been tied to nonpublic information, raising fresh regulatory concerns at a time when the platform is seeking a valuation near $20 billion.
Key startups under scrutiny
One startup under review, Polycool, has publicly hosted material on its website that referred to a “guide to Polymarket insider trading,” according to public reports.
Another firm, Kreo, markets itself as helping users “find insiders before the rest,” highlighting a wider trend of copy-trading products that promise transparency into the actions of highly successful traders.
Both Polycool and Kreo were developed through Polymarket’s Builders Program, launched in November, which opened the door for external developers to build tools on top of the platform.
How the copy-trading tools work
The audited applications use Polymarket’s technology and data feeds to:
- track the performance of top traders
- identify wallets with unusual or “abnormal” trading patterns
- allow users to link bots that automatically mirror selected trades
- send alerts when large or irregular positions are opened
Developers typically charge fees for access to these services, positioning them as advanced tools for navigating fast-moving prediction markets.
Trigger for the audits
Polymarket reportedly began the audits after learning that some developers were sharing lists of suspected insider accounts with their users.
Critics argued this practice enabled traders to systematically follow wallets that might be trading on confidential or early information, raising the probability of market manipulation claims and heightened regulatory scrutiny.
Internal rule changes and regulatory backdrop
Polymarket’s leadership had already been under pressure to curb trading activity based on undisclosed information. The company introduced stricter internal rules last month aimed at raising its compliance standards.
Both Polymarket and rival prediction market Kalshi remain under broader review over how well they adhere to fair trading standards.
The latest internal review is widely viewed as a preemptive move to distance the platform from practices that could attract further attention from regulators such as the Commodity Futures Trading Commission. The CFTC has previously brought enforcement action against Polymarket for operating unregistered swaps.
Impact on market activity
Industry data shows that copy-trading and wallet-shadowing platforms have helped generate hundreds of millions of dollars in additional trading volume for Polymarket in recent months.
On-chain data from early 2026 indicates that services promising to mirror the portfolios of top-performing wallets were responsible for over $410 million in monthly trading volume. That suggests a significant share of activity on the platform may be tied to the tools now under review.
Operational risk for tool users
The audits introduce a new layer of operational uncertainty for traders who rely on these third-party applications.
Because the tools are built on Polymarket’s infrastructure and subject to its internal policies, their accessibility and functionality could be restricted, altered, or suspended with little notice, depending on the outcome of the reviews.
Users who depend on automated copy-trading or alert-based strategies may need to reassess their approach if the services are forced to modify their features or shut down.
Shadowing wallets: popular but contentious
The practice of tracking and mimicking the trades of specific wallets has become a popular strategy in digital asset markets, particularly when volatility is high and market-moving information can spread unevenly.
However, wallet-shadowing is contentious because it can blur the line between smart data analysis and leveraging information advantages that may be rooted in undisclosed or insider knowledge.
Part of a broader compliance crackdown
Polymarket’s internal review comes against a backdrop of tightening enforcement across the digital asset sector.
Regulators, including the Securities and Exchange Commission, have stepped up insider trading cases involving crypto-related assets. The SEC’s successful prosecution of a former Coinbase product manager for trading on nonpublic information about token listings set an important precedent for holding individuals liable for profiting from confidential listing data.
This heightened enforcement climate has made prediction markets and related tools more vulnerable to regulatory challenge, especially where there are signs of information asymmetry or preferential access to trading signals.
Implications for Builders Program developers
For developers participating in Polymarket’s Builders Program, the audits signal a shift in the platform’s tolerance for products that explicitly or implicitly exploit information gaps between different market participants.
In the near term, builders whose tools highlight or monetize suspected “insider” activity face two broad outcomes:
- adapting their services to align with stricter compliance standards, or
- being removed from the Polymarket ecosystem if adjustments are deemed insufficient
Polymarket has not publicly commented on the details of the audits or possible enforcement actions, leaving key questions unresolved about how far the platform will go in reshaping the role of copy-trading products in its marketplace.
Concerned about copy trading risks? Learn how Toobit manages them with secure crypto copy trading strategies.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our terms of service and risk disclosure.
