April 27, 2026 / 4:51 AM EDT / AP
A soldier betting on an operation to oust Venezuela’s leader. Politicians wagering on their own elections. Massive bets on the U.S. president announcing a ceasefire with Iran right before he actually did.
Those incidents have thrust prediction markets into controversy: are these sites legitimate tools for aggregating information or fronts for insider trading? The answer matters as states consider heavy regulation or outright bans, and companies — including those tied to the Trump family — eye growth in the space.
How safe the markets are depends in part on where people trade. Different platforms have different rules and controls, and recent headlines suggest the industry is still maturing while regulators and lawmakers worry.
A central problem is opacity: outsiders often can’t see who places winning bets, fueling suspicion that some traders use non-public information. “There has been very much a laissez-faire attitude toward the industry,” said Richard Warr, a finance professor at NC State. “Regulation always takes time to catch up.”
Polymarket and Kalshi, the two dominant venues, take different approaches. Polymarket largely operates outside the U.S., was once barred from U.S. operations for regulatory noncompliance, and settles bets with cryptocurrencies, allowing users to trade under pseudonyms. Critics say that anonymity can encourage trading on confidential information, though Polymarket says it verifies accounts and payments and therefore knows identities on the back end.
Kalshi has been a U.S.-regulated exchange since 2020. It requires ID verification, complies with U.S. “Know Your Customer” rules, and keeps customer identities hidden only from other bettors on its site. Kalshi promotes itself as a more responsible, compliant alternative.
“Not all prediction markets are the same,” Kalshi spokesperson Elisabeth Diana said as calls for stricter oversight grew after the ceasefire bets. “We support Congress and regulators taking action to police insider trading.”
The latest scandal followed the arrest of an Army special operations soldier accused of using inside information to bet on Polymarket ahead of the capture of former Venezuelan leader Nicolás Maduro. Polymarket said it alerted federal authorities about suspicious activity on the account. “We flagged this, referred it, and cooperated throughout the process,” CEO Shayne Coplan wrote on X, adding that such monitoring happens “constantly behind the scenes.”
Kalshi seized on the episode to say the soldier — identified as Gannon Ken Van Dyke, who reportedly netted $400,000 on his trades — had attempted a similar Maduro wager on Kalshi but was denied. “Unlike competitors whose trading activity is mostly offshore and unregulated, we ban and police insider trading and don’t allow war markets,” a Kalshi spokesperson told the AP.
Other nations have seen similar cases. Earlier this year, Israeli authorities arrested two soldiers accused of trading on secret information about operations against Iran and other matters.
Kalshi also announced that three federal candidates had bet on their own races; the platform fined them and banned them for five years. The company recently adopted rules banning political candidates from trading on their campaigns and blocking athletes and staff from markets tied to the sports they’re involved in. Polymarket likewise updated its rules to prohibit trading on contracts where users might have confidential information or could influence outcomes.
At the federal level, the Commodity Futures Trading Commission maintains it has oversight authority, arguing that event contracts are similar to derivatives it already regulates. That stance has not quieted state officials who view some prediction markets as gambling. “Gambling by another name is still gambling,” New York Attorney General Letitia James said after suing Coinbase and Gemini for allegedly running illegal gambling businesses.
States such as California and Texas have pushed back against the CFTC’s approach, and some governors have warned they will try to block markets in their jurisdictions. Republican Utah Gov. Spencer Cox criticized the idea that the CFTC should regulate novelty derivatives like bets tied to a player’s rebounds, saying he would use “every resource” to stop such markets in his state.
Members of Congress from both parties are also pushing more oversight. Lawmakers want to ban or tightly restrict contracts on wars, assassinations, terrorist attacks and deaths. The CFTC can already bar some event contracts, but some lawmakers are seeking broader prohibitions. “There is no justification for gambling on lives,” Democratic Sen. Adam Schiff said, warning that war-related bets could tip off U.S. enemies and pose national security risks.
The industry’s growth also intersects with political and business interests. Donald Trump Jr. has a stake in Polymarket through a venture capital fund and serves as an adviser to Polymarket and Kalshi. The Trump company that runs Truth Social plans its own prediction market, called Truth Predict. President Trump has expressed mixed feelings: “I was never much in favor, and I don’t like it conceptually, but it is what it is,” he said, later adding he was “not happy with any of that stuff.”
As scrutiny intensifies, platforms are tightening rules and cooperating with authorities, but lawmakers and state officials are moving to shape or restrict the industry. The debate centers on whether prediction markets are valuable sources of crowdsourced insight or risky venues that enable trading on privileged information and threaten public safety and the integrity of elections.