Prediction market platform Polymarket is collaborating with Palantir Technologies and TWG AI, the artificial intelligence arm of TWG Global, to develop a monitoring system aimed at identifying suspicious trading and potential manipulation in sports prediction markets.

The initiative comes as prediction markets draw greater scrutiny over concerns that traders could use insider information to profit from real-world events before those developments become public.

The planned system will combine Palantir’s data infrastructure with TWG AI’s analytics capabilities to oversee trading activity across Polymarket’s platform. The companies say the technology will analyze market behavior, flag unusual patterns, vet participants and generate compliance reports that could be shared with regulators or sports leagues.

Polymarket founder and CEO Shayne Coplan said the goal is to introduce advanced analytics and monitoring tools to sports prediction markets while reinforcing trust among leagues, teams and market participants.

The effort highlights the broader challenges prediction markets face as they move beyond small crypto-native communities and begin shaping conversations around elections, economic developments and major sporting events.

Prediction markets allow users to trade contracts tied to the outcomes of real-world events. Supporters argue that because participants put money behind their expectations, the markets can efficiently aggregate information and often produce reliable forecasts.

Yet the model also raises potential risks.

Critics say traders with privileged or early access to information could profit before that information becomes widely known. In recent years, prediction markets have appeared around sensitive topics such as government policy decisions, military developments, labor strikes and political pardons, prompting debate over whether some traders may be acting on nonpublic information.

Carlos Pereira, a general partner at BITKRAFT Ventures — a firm overseeing more than $1 billion in investments across gaming, artificial intelligence and digital assets — said those concerns could become a serious challenge for the industry if they remain unaddressed.

“There has been what appears to be insider trading,” Pereira said, adding that negative publicity could be especially harmful for a young industry still trying to build credibility.

The surveillance platform Polymarket is developing resembles the monitoring systems used by traditional financial exchanges. According to the company, it will track activity before and after trades are placed, flag coordinated trading behavior and identify participants who may be restricted from participating.

For prediction market operators, the issue is also closely tied to regulation. Insider trading rules for prediction markets remain uncertain in many jurisdictions, particularly in the United States, where regulators continue to debate how the platforms should be classified.

Strengthening oversight could help the sector demonstrate that it can manage these risks on its own.

Without stronger safeguards, Pereira warned, regulators may feel compelled to step in more aggressively.

“If markets don’t show they are trying to manage insider trading,” he said, “the odds of regulation becoming harsher and tapering growth would be much higher.”