The insider news person has found a new way to win.

Written by: ChandlerZ, Foresight News

The scale of the prediction market is rapidly expanding. TRM Labs data shows that the monthly trading volume of prediction markets is expected to exceed $21 billion by 2026. The geopolitical category on Polymarket alone has seen a cumulative trading volume of over $5 billion as of mid-June this year, with Iran-related contracts surpassing $2 billion in trading volume.

However, alongside the growth in scale is the phenomenon of profiting from betting using non-public information. On July 21, Bloomberg Businessweek published a lengthy data investigation analyzing approximately 34,000 suspicious transactions flagged by the on-chain monitoring platform Polysights between August 2025 and June 2026, with the core conclusion being that in the first half of 2026, suspicious transactions on Polymarket amounted to about $200 million.

At the same time, the analysis shows that potential insider trading flagged on the Polymarket platform is highly concentrated, with the top 1% of wallets accounting for over half of the profits. Additionally, 57% of those wallets were created less than 24 hours before the transactions took place. Recently, one account placed a bet on the market option "Will a permanent peace agreement between the US and Iran be reached before June 15?" using a wallet created just two hours before the first trade, profiting $370,000 with odds as low as 6%.

What Bloomberg's Investigation Revealed

Bloomberg was able to conduct this analysis because all trades on Polymarket operate on the Polygon chain, making all bets, odds, and wallet fund flows publicly accessible. In contrast, Kalshi, as a centralized platform regulated by the CFTC, does not make trading data public. This makes Polymarket the ideal sample for studying insider trading in prediction markets.

The data provider Polysights is an AI-driven on-chain analysis platform that has received investment support from Polymarket, Predict.fun, and Underdog Fantasy, completing a $1.5 million funding round in June this year. The platform calculates scores for each transaction based on eight dimensions, including: bet amount, time between account creation and event occurrence, odds levels at entry, transaction volume concentration in specific markets, profit rates, etc. Transactions that exceed a comprehensive score threshold are flagged as suspicious.

Bloomberg conducted further cross-analysis based on Polysights data, revealing several key patterns.

Suspicious transactions are concentrated in geopolitical and military categories. Markets related to airstrikes and ceasefires involving Iran contributed approximately $45 million in suspicious transaction volume, the highest among all categories. Iranian-related bets peaked in late February (around the timing of US-Israel joint airstrikes on Iran). The single contract "When will the US strike Iran?" attracted over $529 million in trading volume.

Profits are highly concentrated in a very small number of wallets. Among the flagged suspicious transactions, the top 1% of profit-generating wallets captured over half of the profits. In these high-profit wallets, 57% were created within 24 hours before the trade, pointing to a typical "use and discard" model: create a new wallet, place a bet, profit, and disappear.

Funding sources point to the United States. In flagged transactions, as much as 71% were funded through US-regulated cryptocurrency exchanges. In Iranian-related geopolitical markets, this ratio reaches 70%, nearly three times that of non-flagged transactions. Polymarket nominally prohibits US users from participating, but users can bypass these restrictions via VPN. Since January 2021, approximately half of the traceable trading volume of around $21 billion on Polymarket has come from wallets funded by US-regulated exchanges.

Reports indicate that some seemingly insider-related large trades are easily detected by companies and other institutions tracking suspicious transactions, but their trading methods often consist of multiple small bets. They increasingly use collaborative wallet clusters, focusing on markets with lower trading and fund volumes, where their trades can still be profitable but draw less attention. For example, 38 associated addresses bet on Trump's actions in Iran and Venezuela, achieving a 98% success rate and ultimately profiting $1.6 million. All addresses withdrew funds through the same Coinbase deposit account.

After the Bloomberg report was published, a well-known analyst in the Polymarket community, Car, also wrote a rebuttal, pointing out that Polysights flagged over 34,000 wallets as "possible insider traders," which included ordinary users betting on Argentina to win the World Cup. Car tracked a wallet specifically mentioned in Bloomberg's report and found that its actual profit was around several hundred thousand dollars, much lower than Bloomberg's claim of $1.5 million. He argued that the transaction history of that wallet (which regularly placed large bets in election and sports markets) more closely resembled that of experienced high-frequency traders rather than insider traders.

This controversy reveals the core difficulty in detecting insider trading in prediction markets—how to differentiate between well-researched decisions and those who already know the answers in a market that encourages price advantages based on information? Polysights’ algorithm cannot answer this question; it can only flag statistical anomalies, leaving the judgment in human hands.

Dozens of interconnected wallets profited $1.6 million through military bets

Bloomberg reports that some seemingly insider-related large trades are easily detected by companies and other institutions tracking suspicious transactions, but their trading methods often consist of multiple small bets. They increasingly use collaborative wallet clusters, focusing on markets with lower trading and fund volumes, where their trades can still be profitable but draw less attention. For example, 38 associated addresses bet on Trump's actions in Iran and Venezuela, achieving a 98% success rate and ultimately profiting $1.6 million. All addresses withdrew funds through the same Coinbase deposit account.

Since 2026, there have been the first two insider trading criminal charges in US history in the prediction market field.

The first involved US military special forces betting on the Venezuela operation. On April 23, the US Department of Justice and CFTC filed a criminal lawsuit against Army Special Forces Sergeant Gannon Ken Van Dyke. Van Dyke participated in the planning and execution of Operation Absolute Resolve, aimed at capturing former Venezuelan President Nicolás Maduro on January 3. He leveraged confidential information obtained during the operation to invest approximately $34,000 on Polymarket, ultimately profiting around $409,000. Afterward, Van Dyke requested Polymarket to delete his account and changed the registered email address for the cryptocurrency exchange to hide his identity. He was charged with multiple offenses, including illegal use of confidential government information for profit, theft of non-public government information, commodity fraud, and telecommunications fraud.

The second involved an Israeli reserve officer leaking information to bet on an operation in Iran. Israeli authorities arrested two individuals, 30-year-old iGaming industry employee Omer Ziv, and an Israeli Air Force reserve major whose name was not disclosed for national security reasons. The indictment shows that the major informed Omer Ziv via WhatsApp about the upcoming launch of Operation Rising Lion targeting Iranian nuclear facilities. Ziv then established a position on Polymarket, ultimately profiting about $128,400, which he shared in cryptocurrency with the officer. Both had been detained since the end of January, and in March, Ziv's identity was revealed.

The common feature of these two cases is that the individuals had access to confidential information regarding imminent military operations, while the prediction market provided a direct monetization channel for such information.

A paper by Columbia Law School Professor Joshua Mitts and University of Haifa Professor Moran Ofir published in March this year, titled "From Iran to Taylor Swift: Informed Trading in Prediction Markets," provided a broader quantitative analysis. The study identified over 210,000 suspicious transactions, bringing around $14.3 million in abnormal profits to "informed traders" since 2024.

The study used a composite scoring system based on five dimensions: cross-market betting scale, individual trader betting scale, profit rates, pre-event time windows, and directional concentration. Flagged traders had a success rate of 69.9%, deviating from random probability by over 60 standard deviations.

Before the US and Israel launched airstrikes against Iran on February 28, six newly created wallets collectively earned about $1.2 million on Polymarket, with one wallet completing its first transaction 71 minutes before the news became public, profiting about $553,000.

Regulatory and industry responses

The regulatory responses to insider trading in prediction markets are advancing on multiple fronts simultaneously.

At the federal enforcement level, the CFTC has initiated a broad investigation into Polymarket. In January, Congressman Ritchie Torres introduced the Public Integrity Financial Prediction Markets Act, prohibiting anyone with access to non-public significant government information from trading in prediction markets; this bill has been co-signed by over 40 Democratic lawmakers. At the end of April, the Senate unanimously passed a resolution prohibiting senators and congressional staff from participating in prediction markets. In May, House Oversight Committee Chairman James Comer launched a congressional investigation specifically targeting insider trading in prediction markets.

At the financial institution level, Goldman Sachs updated its internal trading policy in July, prohibiting employees from participating in political and financial-related prediction market contracts, only retaining exemptions for sports and entertainment contracts.

At the state government level, pressure is also directed at Kalshi. A judge in Washington state issued a preliminary injunction against Kalshi, ruling it constitutes illegal gambling. The Attorney General in Arizona has also filed criminal charges against Kalshi, accusing it of operating gambling services without a license.

At the platform level, Polymarket updated its market integrity rules in March, explicitly prohibiting trading based on confidential information obtained in violation of trust obligations, acting on insider tips, and betting on events where one has the ability to influence the outcomes. The platform stated it had submitted leads on nearly 100 wallets to law enforcement agencies, some of which directly contributed to the prosecutions of the aforementioned two criminal cases.