Hours before the United States military arrested and abducted Venezuelan President Nicolás Maduro and his wife, bombing sites across Caracas in the process, an anonymous user on the prediction market Polymarket was betting thousands of dollars that an invasion was imminent.
Whoever that user is, they are likely celebrating now. Prediction markets like Polymarket and Kalshi allow users to place bets on highly specific scenarios of various kinds. Users can bet real money on the fate of various Stranger Things characters in Season 5, or put their funds behind Arsenal in a live match.
But prediction markets are also able to take bets on discrete questions about domestic and international policy, which can be easily manipulated by users with insider knowledge. The whale user, who made $400,000 when the Venezuela war markets resolved early Saturday morning, may be one of those insiders, X user Tyson Brody suggested. The evidence is compelling: Bettor “Burdensome-Mix” created their account just a week ago, and bought shares in some of Polymarket’s largest Venezuela-related markets, like “Maduro out by…?” and “US forces in Venezuela by…?”
We know that news organizations had foreknowledge of the military action in Venezuela but withheld it from the public, in their telling to avoid endangering U.S. troops. That the information also leaked out to Polymarket users seems obvious given the results.
Insider trading has been a concern since prediction markets were first introduced. As recently as December, one Polymarket user made $1 million in just 24 hours by betting on end-of-year Google search results, raising concerns that they are a Google employee with advance knowledge.
But with policy bets, the consequences of prediction market insider trading are more wide-ranging, especially for a Trump administration already demonstrably open to corruption. Administration officials can use prediction markets to easily enrich themselves from their own decisions, or pass off that knowledge to allies or family members.
Anyone connected to politics could try this. For example, during the New York City mayoral campaign, financier Bill Ackman suggested that Eric Adams should place a big bet on Andrew Cuomo on Polymarket before dropping out of the race, thereby enriching himself by improving Cuomo’s odds upon his exit. (Adams did drop out, though there’s no evidence of him making the bet; Cuomo lost anyway.)
“Of course insiders shouldn’t be able to get rich off of policy decisions—but even more concerning is the possibility that people are skewing policy outcomes in order to make their bets pay off,” said Sean Vitka, the executive director of Demand Progress. “And questions related to whether or not, and when, military action might be undertaken are especially vulnerable to such manipulation because the president frequently moves with discretion over the timing and (legally or not) without notice to the public or Congress.”
Prediction markets don’t meaningfully discourage insider trading.
He warned that insiders don’t necessarily need to change policy to make money. Instead, they can shape the discourse and push the market in their favor: “They can place a bet, then leak information that seems like the outcome on which they bet is likely, skew the markets in their favor, and sell and get paid off regardless of the final outcome,” he said.
The new revelations of prediction market manipulation come as Congress is considering legislation to ban members of Congress from owning and trading individual stocks. House Republican leadership has suggested that the bill will be voted on in early 2026, but Democrats led by House Minority Leader Hakeem Jeffries (D-NY) have protested that the president and vice president should be included in the ban.
The growth of prediction markets renders these debates practically useless. Members of Congress or their staffers, and certainly members of the Trump administration, who want to use inside knowledge for profit can do so much more effectively and privately through platforms like Kalshi and Polymarket.
Prediction markets, unlike the stock market, let users bet on highly specific scenarios: who Trump will meet with this year, who he will nominate as Fed chair, which cabinet members will leave office, whether Trump will impose semiconductor tariffs this year, whether Israel will strike Iran before the end of January, or whether the U.S. will seize another Venezuelan oil ship in 2026.
For an insider trader in a traditional financial market, said Mark Hays, the associate director for cryptocurrency and financial technology at Americans for Financial Reform, “unless you’re in a position to know [specific financial] information, it can be difficult to be an insider trader.”
On prediction markets like Kalshi, whose founder explicitly said their “long-term vision is to financialize everything,” the scope of activities that can be gamed is vastly larger than on traditional financial markets.
“We’ve democratized insider trading,” as Hays described it.
Users are anonymous and, on Polymarket, can link cryptocurrency wallets that require no identifying information to open.
Kalshi has boasted that its forecasts are more accurate than Wall Street analysts on the movement of stocks, inflation, and other economic indicators.
“Derivatives, crypto, and gambling—sorry, I mean ‘prediction markets’—have all been collapsed into a single marketplace remarkably quickly,” said Graham Steele, a former Treasury Department official in the Biden administration. “It’s quite clarifying about the true nature of some of these products.”
Prediction markets don’t meaningfully discourage insider trading; Kalshi includes a prohibition on insider trading on its website, but has no mechanism to enforce the rule, since users can bet pseudonymously. Polymarket doesn’t list any rule against it. Many proponents of prediction markets actually argue that insider trading is beneficial, since insider bets would theoretically make markets more accurate.
The threat of insider trading has been recognized before. In the early 2000s, the Defense Advanced Research Projects Agency (DARPA), known for creating an early form of the internet, dipped its toes into prediction markets by creating the Policy Analysis Market. The market would have allowed investors to bet on the likelihood of assassinations, terror attacks, and other geopolitical events in the Middle East. One graphic showed how users would be able to bet on the likelihood that Jordanian King Abdullah II would be overthrown, or whether former Palestinian leader Yasser Arafat would be assassinated.
Senate Democrats found out about the scheme and disclosed it, raising fears that the market could incentivize the very events it was trying to predict. “Investors” inside the Pentagon or CIA could, theoretically, wager that a political figure would be assassinated and carry out the act themselves to earn the money. “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” said Sen. Ron Wyden (D-OR), one of the two main Democrats who exposed the scheme in 2003.
After this criticism, the Policy Analysis Market was scrapped. But now, Americans can bet on regime change from the comfort of their own homes. And the same concerns about insider trading and manipulation remain.
Wyden, who remains in office, didn’t respond to a request for comment from the Prospect.
In response to the threat of insider trading in political prediction markets, Rep. Ritchie Torres (D-NY) plans to introduce a bill prohibiting all federal elected officials, political appointees, and executive branch employees from making prediction market transactions if they have insider information or could obtain it through their official duties.
Torres, of course, has been a major booster of crypto, which creates the secrecy and potential for fraud that can be exploited through prediction market insider trading. He’s even the co-chair of the Congressional Crypto Caucus. “It’s completely cynical,” said Corey Frayer, director of investor protection at the Consumer Federation of America, who recounted a history of pro-crypto lawmakers introducing bills with no chance of passing that would ban some obviously fraudulent activity, only after giving up leverage by agreeing to crypto deregulation. “I have told all of them, this is you covering your ass for crypto fraud stuff.”
It seems unlikely that President Trump would sign such a bill, given both his deregulatory outlook and his own family’s personal interest in prediction markets. Donald Trump Jr. is an adviser to both Kalshi and Polymarket, and has invested millions into Polymarket through his firm, 1789 Capital.
Prediction markets are technically already regulated by the Commodity Futures Trading Commission (CFTC). Yet the agency’s five-member board is currently populated by just the commissioner, Michael Selig, who only was sworn into office 14 days ago, on December 22.
Frayer said that while the CFTC has authority to crack down on market manipulation, there isn’t well-established judicial precedent for putting insider trading within that authority. “It’s not clear [insider trading] is really a violation of market manipulation and it would be a hard case to make,” he said.
The Biden administration’s CFTC tried to prevent platforms like Kalshi from offering markets on political questions, arguing that they were akin to gambling and against the public interest. Kalshi sued the CFTC and won, which opened the floodgates for politically oriented prediction markets.
Steele, the former Treasury Department official, suggests regulating prediction markets like futures. They’re currently regulated as swaps, which happen on private exchanges, avoiding the same rules that govern public futures markets.
But any regulation of these markets seems far away under the Trump administration.
“The fact that it seems to be that there are insiders capitalizing on the loose, permissive regulatory space around these kinds of platforms in the midst of major geopolitical spaces just speaks to the corrosive impact of this kind of undue influence” that crypto and prediction market companies have in politics, Hays said. “We should have never gotten here.”