Prediction markets have emerged as a high-stakes battleground for U.S. regulators and state officials, with scrutiny focusing on whether the platforms can prevent bets based on nonpublic information. The renewed attention has been driven by cases involving trades that critics say were too well timed—especially as people bet on major geopolitical developments and political outcomes.
The industry has also drawn wider concern because, in the view of many outside it, no one can easily tell who is placing winning bets. That opacity has helped fuel suspicion that participants could be trading on information not available to the general public, and it has increased calls for Washington to move faster to regulate what critics call illegal gambling operations.
Richard Warr, a finance professor at NC State University, framed the challenge as one of regulatory lag, saying there has been “very much a laissez-faire” attitude toward the industry and adding that “Regulation always takes time to catch up.” The pressure for action has intensified as lawmakers and state leaders argue that event-betting venues can affect national security and public trust.
Polymarket and Kalshi, the two dominant platforms, have approached the issue differently. Polymarket operates primarily outside the U.S. and has used crypto-based settlement that allows customers to use pseudonyms and remain anonymous, which critics argue can create space for people with inside information. Experts cited by the reporting say that even when users appear anonymous to other bettors, the platform should still know identities on the back end when accounts and payments were verified.
Kalshi, by contrast, has portrayed itself as a more compliant option. It has been a U.S.-regulated exchange since 2020, requiring customers to show ID, while shielding identities from other bettors on its site. It also operates onshore and, the reporting says, follows U.S. “Know Your Customer” rules intended to reduce the risk that money launderers use the market for criminal activity. In that competitive push for customers, Kalshi has emphasized its enforcement posture, including a message that “Not all prediction markets are the same.”
Kalshi spokesperson Elisabeth Diana said the company supports Congress and regulators taking action to police insider trading, and she said Kalshi bans and polices insider trading and does not allow “war markets.” The company’s messaging has come as calls for a crackdown grew earlier this month after bets tied to a U.S.-Iran-related ceasefire episode, a wave of attention that had already been building from Washington’s broader scrutiny of geopolitical event-betting.
One recent flashpoint involved Venezuela. The reporting says alleged insider trading emerged after the arrest of an army special operations soldier accused of using inside information to bet in Polymarket before the capture of former Venezuelan leader Nicolas Maduro. Polymarket said it alerted federal authorities that something was wrong with the soldier’s account, with Polymarket CEO Shayne Coplan posting on X that the company “flagged this, referred it, and cooperated throughout the process,” adding that the situation “happens constantly behind the scenes.”
Kalshi, however, offered a different framing based on its own enforcement. A Kalshi spokesperson told the AP that the same soldier—Gannon Ken Van Dyke, who had netted $400,000 on his trades—had tried to place a Maduro bet earlier on Kalshi but did not pass muster and was turned down. That contrast between platforms has helped set the tone for the debate over what oversight can realistically ensure.
Regulatory scrutiny has also extended beyond military and geopolitical bets. Earlier this year, Israeli authorities arrested two soldiers for allegedly trading on secret information about Israel’s operations against Iran, among other matters, according to the report. In the U.S., Kalshi said it had announced that three politicians running for federal office gambled on their own elections; the candidates were fined and banned from Kalshi for five years, including one running for the Senate in Virginia and two congressional hopefuls from Texas and Minnesota.
In response to the widening pressure, the industry has started tightening some rules. Kalshi said it would ban political candidates from trading on their own campaigns, and it said it would preemptively block anyone involved in college or professional sports from trading contracts related to the sports they play or are employed by. Polymarket, meanwhile, recently rewrote its rules to say that users cannot trade on contracts where they might possess confidential information or could influence the outcome of an event.
The federal-state split in oversight is a core part of the controversy. The U.S. government maintains that the Commodity Futures Trading Commission should be the agency responsible for oversight and that prediction markets are not covered by state gambling laws. Some states disagree. New York state attorney general Letitia James said after suing two new players—Coinbase and Gemini—that “Gambling by another name is still gambling” and that it “is not exempt from regulation.”
In larger states where bettors may use prediction markets to work around sports betting limits, the pushback has been especially intense. Utah Gov. Spencer Cox, a Republican, wrote in response to a social media post from CFTC chairman Michael Selig in February that he didn’t recall the CFTC having authority over the “derivative market” of LeBron James rebounds, and he vowed to use “every resource” to block the market from his state.
Members of Congress have also raised alarms about the risk of event contracts related to war and violence, including bets on war, assassinations, terrorist attacks and “a person’s death.” The reporting says federal law already gives the CFTC the authority to bar some event contracts, but some lawmakers are pushing for an outright ban. Democratic Sen. Adam Schiff said there is “no justification for gambling on lives,” adding that bets on war could also tip off U.S. enemies and therefore pose national security risks.
The scrutiny has landed close to politics, too. The reporting says Donald Trump Jr. has a stake in Polymarket through a venture capital fund in which he is a partner and that he also advises both Polymarket and Kalshi. It also says Trump’s business, which runs the social media platform Truth Social, plans to build its own prediction market called Truth Predict.
As for President Donald Trump’s position, the report said it is not clear whether he will push for more regulation, though it quoted him describing his views on online bets. Trump said, “I was never much in favor, and I don’t like it conceptually, but it is what it is,” and he added, “Now, I think that I’m not happy with any of that stuff.”