Washington is starting to ask hard questions about whether government insiders are using what they know to make money on political betting platforms and whether anyone has the power to stop them.
Platforms like Kalshi and Polymarket have pulled prediction markets out of the shadows in recent years, drawing ordinary people into wagering on everything from storm paths and game scores to wars, elections, and government decisions.
But a string of unusually well-timed, large-dollar bets has put both platforms and federal regulators under pressure.
Polymarket uses cryptocurrency for all transactions. It has opened markets on whether Iran’s government will collapse and on U.S. military action in the region.
Events that sitting American officials have direct influence over.
By Wednesday, more than $25 million had changed hands on a single market, asking when President Donald Trump would declare an end to military operations in Iran.
Suspicious bets draw scrutiny
The suspicion grew louder after analysts looked into betting patterns tied to former President Biden’s last-minute pardons.
A Paris-based data firm, Bubblemaps, tracked one Polymarket account that walked away with $316,346 after placing well-timed bets on those pardons.
Joshua Mitts, a Columbia Law School professor who consults for the Justice Department, said the odds of that happening by coincidence are “virtually zero.”
That was not the only case drawing scrutiny. Six accounts suspected of trading on inside knowledge made a combined $1.2 million at the moment U.S. airstrikes hit Iran.
Senator Elizabeth Warren, a Democrat from Massachusetts, responded bluntly on X: “That’s not luck. That looks like insider trading. A handful of insiders should not be allowed to turn global crises into personal paydays. I’m pushing for an investigation.”
Part of what makes this so difficult to address is the gap between what these platforms do and what existing laws cover.
Richard Painter, who served as the top ethics lawyer in the George W. Bush White House, pointed out that prediction markets are not classified as securities markets, which means the standard insider trading statutes simply do not apply.
The STOCK Act does bar government officials from using non-public information for personal financial gain, but anonymous crypto accounts make it almost impossible to trace who is actually placing the bets.
As Mitts explained, when investigators subpoena records, and the trail leads to an account with no ties to the White House, the case stalls.
Regulatory gaps leave enforcement in question
The two biggest platforms operate under very different rules. Kalshi holds a federal license as a Designated Contract Market and falls under the watch of the Commodity Futures Trading Commission.
It is required to verify the identity of its users and has rules in place against insider trading.
Kalshi’s CEO, Tarek Mansour, said at a recent conference that insider trading on his platform “can and will at some point be a federal crime” and predicted the Justice Department would eventually prosecute cases.
Polymarket, by contrast, operates largely beyond the reach of U.S. law.
Federal prosecutors in Manhattan met with the company last month to look into whether its markets had crossed any legal lines, but the platform’s offshore setup and use of crypto continue to block easy oversight.
The CFTC, which would normally lead enforcement in this space, is running on a skeleton crew.
The agency currently has just one sitting member, its chair, Michael Selig, instead of the usual five, and its budget sits below $400 million.
Selig is expected to tell Congress that anyone involved in fraud or insider trading in these markets “will face the full force of the law.”
In the meantime, White House staff received an email in March warning them that betting on these markets using government information breaks federal ethics rules.
On Capitol Hill, Senator Adam Schiff and Representative Mike Levin introduced legislation they called the Death Bets Act, which would ban markets tied to terrorism, assassination, and war.
The industry, for its part, is projected to hit $1 trillion in value within four years.