CFTC Probed Polymarket for Insider Trading on Biden Pardons and Iran War
FOIA documents reveal federal investigations into 'prescient' bets on government secrets and corporate data.
The Commodity Futures Trading Commission (CFTC) launched three investigations into suspicious trading activity on the prediction market Polymarket, according to documents obtained by WIRED via the Freedom of Information Act. The probes targeted bets on high-stakes geopolitical events and government actions, signaling a federal crackdown on the monetization of non-public information.
The investigations focused on a series of highly specific trades, including bets regarding the war with Iran and President Joe Biden's final pardons. In one instance, an anonymous trader profited approximately $316,346 by betting on Biden's last-minute pardons, placing specific wagers on individuals including Jim Biden, Liz Cheney, Adam Schiff, and Adam Kinzinger. Beyond government secrets, the CFTC also looked into corporate espionage; a Google engineer was charged with using confidential "Year in Search" data to generate roughly $1.2 million in profits on the platform.
The Rise of Prediction Markets
These investigations come as prediction markets like Polymarket and Kalshi experience explosive growth during the second Trump administration. Some industry projections suggest the sector could reach $1 trillion in annual volume by 2030. While Kalshi operates under CFTC regulation, Polymarket functions largely as an overseas cryptocurrency exchange. This structure provides traders with a level of anonymity not present in traditional regulated markets, creating a fertile ground for those with inside information to place bets without immediate detection.
A New Frontier for Insider Trading
The intersection of crypto-based markets and confidential data has created a regulatory gray zone. Joshua Mitts, a Columbia Law School professor and DOJ advisor, noted that the odds of such specific betting patterns happening by random chance are "virtually zero." The shift from the restrictive approach of the Biden administration to a more "hands-off" stance under the Trump administration may be lowering the perceived risk for individuals seeking to monetize state or corporate secrets. This trend raises significant concerns regarding national security and corporate integrity, as non-public information becomes a tradable asset.
The Regulatory Gap
Legal experts warn that the current lack of oversight invites further abuse. Nizan Packin, a law professor at Baruch College, stated that without clearer regulation and stricter enforcement, the "gray zone" will only expand, leading to more questions about the integrity of these markets. As prediction markets continue to integrate with geopolitical events—such as the toppling of Nicolás Maduro or the death of Iran's Ayatollah Ali Khamenei—regulators face the challenge of policing a decentralized, global platform that operates outside traditional jurisdictional boundaries.