Polymarket referred dozens of possible military insider trading cases to DOJ, source says
By Marshall Cohen, CNN
Washington (CNN) — The prediction site Polymarket referred dozens of accounts that showed signs of potential military insider trading to the Justice Department for investigation, a senior company official told CNN.
The referrals, which have not been previously disclosed, pertained to accounts flagged by a watchdog group in a report published Thursday, but the referrals predated the report.
That nonpartisan organization, the Anti-Corruption Data Collective, said it analyzed a massive trove of publicly available Polymarket data and found 152 accounts that profited about $8 million on war markets – including about the Iran war – and contained several hallmarks of insider activity.
The Justice Department did not respond to CNN’s request for comment Friday. Polymarket itself has not been accused of wrongdoing.
On prediction markets, traders can bet on everything from sports, to culture, elections, the weather and war. (War markets are illegal under US law. But they are still available, and highly popular, on Polymarket’s offshore site.
This is the latest in a series of revelations about potential military-related insider trading on Polymarket, which has climbed to new levels this year as prediction platforms have boomed in popularity, with billions of dollars in weekly trading volume.
In April, the Justice Department charged a Special Forces soldier with using military secrets to bet on the US raid that captured Venezuela’s then leader, Nicolás Maduro. (He pleaded not guilty.) CNN also reported that one trader won nearly $1 million from dozens of suspicious trades about US and Israeli strikes against Iran.
There have also been insider-trading concerns on Kalshi, Polymarket’s main rival, but those cases involved trades about elections, culture and “mention markets” about what President Donald Trump would say at his speeches.
CNN has a partnership with Kalshi and uses its data to cover major events. Editorial employees are prohibited from using prediction markets.
CEO touts surveillance tools
The watchdog report said many of the 152 accounts they flagged showed signs of potential insider activity. For instance, many were brand-new wallets that placed remarkably well-timed bets with longshot odds. They had a staggering 97% win rate. (Most traders on prediction sites lose money.)
The senior Polymarket official, who was granted anonymity to discuss sensitive matters, agreed that these are often clues suggesting insider trading, but they stressed that those patterns alone don’t prove wrongdoing. They said the company’s internal surveillance tools monitor about 150 additional signals and trading patterns to hunt for insider activity.
Polymarket founder and CEO Shayne Coplan spoke about the company’s efforts to crack down on insider trading Thursday at a public meeting of the Commodity Futures Trading Commission, the federal agency that regulates prediction markets. Coplan is a member of a CFTC advisory committee.
He touted the fact that the company recently hired a former FBI official who built “custom, proprietary surveillance software” for Polymarket’s platform.
“We talk with our partners – Palantir, Chainalysis – and they’re like, ‘damn, you guys have this in-house? This is serious!’” Coplan said. “We’re grateful to have that, and we continue to invest more in it.”
He also said “the Maduro thing” and other insider-trading cases were “problematic,” but “when that happened, we worked with the commission, we worked with law enforcement.”
Amid the mounting scrutiny, Polymarket announced in March what it called “enhanced market integrity rules” for its offshore and US platforms. It banned trades based on insider tips, and said people in “a position of authority” to affect the outcome of an event can’t trade on related markets.
National Security Risks
These measures haven’t stopped investigators from getting involved. And some lawmakers continue to advocate for more regulation on these platforms.
The Wall Street Journal reported that the CFTC is investigating whether Polymarket is operating within the law. The House Oversight Committee is also scrutinizing prediction markets for insider trading, and the New York City Council is probing these companies over their marketing practices.
A bipartisan coalition of 44 state attorneys general is pushing for more regulation. So are an increasing number of Democrats and Republicans in Congress, who have said war markets could threaten national security by incentivizing corruption in the military and tipping off US adversaries.
“We have a national security infrastructure designed to keep things secret,” said Michelle Kendler-Kretsch, one of the watchdog group’s researchers. “Providing an opportunity for someone to break that seal of secrecy, just to make some money, puts our entire national security structure at risk.”
The-CNN-Wire
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