Prediction market Polymarket is hiring an in-house market creation group to work immediately with prospects. This can be a change that might blur the traces between prediction markets and conventional sportsbooks.
The corporate lately mentioned constructing new desks with merchants and sports activities bettors, Bloomberg reported, citing individuals accustomed to the matter. The transfer follows the same transfer by rival Kalsi, which has championed its personal buying and selling group as a manner to enhance liquidity and person expertise.
In follow, nonetheless, it’s completely potential to make use of outdoors market makers, elevating questions in regards to the true motivations of polymarkets. This determination seems to be extra targeted on producing income than enhancing the product.
“They do not cost charges. They do not earn money. They need to discover a solution to monetize it,” mentioned Harry Crane, a statistics professor at Rutgers College.
Crane mentioned Polymarket plans to supply parlays via an RFQ protocol, set costs at an in-house desk and match these bets.
“These have to be backed by giant sums of cash and, if performed accurately, can convey nice advantages to the house,” he mentioned. “I believe that is short-sighted and in the end a mistake, however time will inform.”
Small income stream and large threat
Klein additionally questioned the monetary logic behind the technique.
“Given the massive valuations, monetization will not be a viable technique if that is the objective,” he mentioned. “Assuming the buying and selling desk is worthwhile, which it ought to be, the earnings are tiny in comparison with its valuation.”
Extra importantly, Crane warned, firms cannot afford desks. an excessive amount of make a revenue.
“Corporations should not need their in-house buying and selling groups to make an excessive amount of cash, as a result of that might create severe public relations points and doubtlessly authorized points,” he mentioned. “Take a look at the category motion lawsuit in opposition to Kalsi for doing the identical factor. That lawsuit seems to be 100% frivolous, however the optics and PR are usually not optimistic.”
Mr Crane argued that past the authorized dangers, the transfer would undermine Polymarket’s strategic identification. “This reduces the chance for Polymarket to distinguish itself from its opponents and dedicates assets and focus to issues which can be critically totally different from what acquired the corporate right here.”
Transferring to a sportsbook mannequin
This alteration makes Polymarket extra just like a sportsbook, permitting customers to successfully commerce with the home moderately than different bettors. At a sportsbook, costs are set and constructed energetically by in-house merchants. Usually provides operators a 5% to 10% edge.
The enlargement of polymarkets into this space can create conflicts of curiosity and fear the very bettors who take part in prediction markets. It wasn’t sports activities e-book. The market will not replicate the collective knowledge of merchants, however as a substitute the pricing selections of Polymarket’s inner desks.
It additionally dangers damaging Polymarket’s repute as a barometer of real-world chances. That repute was a key driver of the corporate’s fast development throughout the 2024 US election interval, when information shops recurrently cited Polymarket alongside polling information, lending it mainstream legitimacy.
Blurring the traces and elevating questions
Crane mentioned sportsbook comparisons underestimate the issue.
“Are the traces between prediction markets and conventional sportsbooks blurring? Sure, however it’s worse than that,” he mentioned. “It is nicely understood that in a sportsbook, the e-book is the buying and selling accomplice and can use any data to realize a bonus over the client. Exchanges are alleged to be totally different.”
“However so long as there are inner individuals or privileged individuals on an alternate, there’ll at all times be suspicions that they’re reaping an unfair benefit,” Crane added, pointing to a latest controversy at NoVig that voided many successful bets as a result of an inner market maker was a shedding commerce accomplice.
The introduction of in-house desks additionally raises operational and moral points paying homage to the dynamics at FTX and Alameda. How a lot order stream or deposit timing information does the desk have entry to? Can it commerce forward of buyer stream, or does it merely present liquidity and acquire spreads, as some exchanges declare?
Dangers to model and belief
Whereas market making could create new sources of revenue, this transformation threatens the perceived neutrality and belief that helped elevate Polymarket’s profile. The corporate didn’t instantly reply to CoinDesk’s request for remark.
Equity points apart, Crane believes this technique is solely unsuitable.
“It is a dangerous enterprise determination to take a platform that beforehand felt so novel and totally different and as a substitute make it feel and appear like each different platform,” he mentioned.
