Federal prosecutors and regulators are stepping up their scrutiny of suspicious bets in political prediction markets, The Wall Street Journal reported on Saturday.
The Commodity Futures Trading Commission (CFTC) and the Justice Department are requesting information from leading platforms Kalshi and Polymarket.
This comes amid a sharp rise in bets related to rapidly changing political events, new laws, and US military operations.
The stepped-up oversight indicates that regulators are seeking to keep up with the flow of money targeting political volatility. The risk of insiders exploiting government secrets became clear last month when authorities arrested Gannon Ken Van Dyke, a US Army Special Operations soldier.
According to investigators, he used confidential military briefings to make $400,000 on Polymarket by betting on the overthrow of Venezuelan leader Nicolás Maduro. Investigators are also looking into a sharp increase in oil bets placed minutes before President Trump announced a postponement of military strikes on Iran. The announcement caused significant volatility in energy and stock markets.
The rapid growth of these platforms has created tensions over standard financial regulations. Kalshi is regulated by the CFTC and collects basic user identities, but does not request employer information.
Polymarket is registered overseas and does not verify user identities at all, relying on public blockchain records to detect unusual trading activity.
U.S. Attorney for Manhattan Jay Clayton criticized the lack of proper record-keeping at a financial event on Wednesday, saying, "If they want to operate in a way that the public trusts them, they're going to have to get those records in place."
Proving insider trading in prediction markets is difficult, as current regulations were designed for corporate stocks, not government actions.
Nevertheless, regulators are signaling that more cases are coming. Speaking at George Washington University Law School, CFTC Enforcement Director David Miller warned, "Unfortunately, as everyone knows, this has become a real problem in prediction markets. It seriously undermines market integrity and trust."