Polymarket might be about to cross a line that could make it look a lot more like a casino and a lot less like a wisdom-of-the-crowds experiment. The prediction market platform is reportedly hiring for an internal market-making team that would trade against its own users, according to Bloomberg sources familiar with the matter.

Here's what that means: A market maker continuously buys and sells an asset at quoted prices to provide liquidity and enable instant trading. In prediction markets specifically, market makers buy and sell contracts on different event outcomes. Think of them as the people always ready to take the other side of your bet.

Internal market-making teams are pretty standard on exchange platforms. But when a prediction market does it, things get philosophically murky. If there's a house team actively setting prices, are the odds still reflecting what the crowd thinks? Or are you now essentially betting against a sophisticated internal trading operation, just like you would at a sportsbook?

Polymarket didn't respond to requests for comment from MarketDash.

Déjà Vu With Kalshi

Here's where it gets interesting: Polymarket's competitor Kalshi is currently dealing with serious blowback for doing exactly this. A proposed class action lawsuit filed last month alleges that Kalshi's internal market-making team sets odds to the detriment of customers.

"When consumers place bets on Kalshi, they face off against money provided by a sophisticated market maker on the other side of the ledger," the complainants claimed in the proposed suit.

Kalshi co-founder Luana Lopes Lara pushed back hard on X, insisting the platform's internal trading team only exists to provide liquidity and improve user experience. "[Kalshi's] peer-to-peer and there is no house," she said, adding that the team had "no preferential access or treatment."

So why would Polymarket walk into this controversy knowing how it's playing out for Kalshi? That's the million-dollar question.

The Bigger Regulatory Battle

This internal trading team debate feeds into a much larger turf war about what prediction markets actually are. Are they gambling platforms that should be regulated by state gaming authorities? Or are they futures exchanges that fall under the Commodity Futures Trading Commission's jurisdiction?

Kalshi is currently locked in lawsuits with several state regulators over exactly this question. And Polymarket has its own complicated regulatory history. The platform just returned to U.S. markets last week after blocking American users for three years. That exile started in 2022 when Polymarket settled with the CFTC for $1.4 million for allegedly operating an "illegal unregistered or non-designated facility."

Now, fresh off that return to U.S. soil, Polymarket is apparently building out the exact kind of internal trading operation that's causing regulatory and legal headaches for its main competitor. The timing is certainly bold, if nothing else.

The fundamental question remains: When a platform has its own team actively trading against users, does it stop being a prediction market and start being a sportsbook with extra steps?