Meanwhile, the incidents to emerge so far may be only the tip of the iceberg. Given the massive volumes on the platform, it’s a near certainty that other insiders in government and companies have used confidential information to enrich themselves. Polymarket may be especially prone to these shenanigans, because its corporate structure for now leaves it outside of U.S. and state laws: Its off-shore platform lets users not only place bets, but create wagers of their own with little scrutiny or oversight.
The growth of prediction markets, which are also capable of producing valuable real world intelligence, has been spurred by recent court rulings, but also by support from the White House, which generally favors deregulation in all sorts of financial markets. President Donald Trump’s son, Don Jr., is an investor and advisor to Polymarket, and a paid advisor to its primary competitor, Kalshi. Meanwhile, the President himself has made clear financial crimes are not a priority for his administration, dismissing or suspending many cases, and in some instances dismantling offices responsible for prosecuting them.
All of this has led some bettors to view prediction markets as an insider trading free-for-all. This era is likely coming to an end, however, as the recent incidents related to the U.S. military appear to have come as a tipping point—finally rousing everyone from Congress to regulators to the companies themselves to call for oversight.
Kalshi also revealed that it was investigating other potential insider trading incidents, based on tips and on situations where a user’s betting patterns appeared suspicious.
In late March, the company also announced “new technological guardrails that preemptively block politicians, athletes, and other relevant people from trading in certain politics and sports markets.”
The moves appear, on one hand, to be an attempt by Kalshi to position itself as more compliance-focused than arch rival Polymarket, which withdrew from the U.S. in 2022 after running afoul of the Commodity Futures Trading Commission. (Polymarket has since acquired a licensed U.S.-based firm that will allow it to re-enter the country.)
For its part, Polymarket in late March published “enhanced market integrity rules” to prevent insider trading, pointing to three forms of forbidden behavior: Trading on stolen confidential information, trading on illegal tips, and wagering by those in position to shape the outcome of a bet.
All of these announcements coincide with lawmakers and regulators, who initially appeared caught flat-footed by the sudden rise of prediction markets, recently vowing to take action against insider trading.
Meanwhile, the Justice Department is reportedly investigating the trades related to the capture of Venezuela. While not commenting on specific wagers, a spokesperson for the agency told CNN that a series of existing laws—including those related to insider trading, anti-money laundering laws, marketing manipulation and fraud—applied to a “wide range of observed activity.”
The recent controversies over insider trading have also led over 40 Democrats in the House and Senate, organized by Sen. Elizabeth Warren (D-Mass.), to send a letter to top regulators and ethics officials asking for training on how prediction markets operate.
Republicans have so far remained largely quiet on the issue. White House spokesman Kush Desai recently declared that, “All federal employees are subject to government ethics guidelines that prohibit the use of nonpublic information for financial benefit” but dismissed any allegations of administration members placing improper bets as baseless.
