The Many Cases of Insider Trading on Polymarket

High-profile cases of suspected insider trading are becoming a constant reality on Polymarket. These stories cover everything from leaked industry reports to classified state secrets. But Polymarket isn’t worried about them: to this platform, insider knowledge is a feature, not a bug.

2025 ended with a major scandal. A Polymarket trader profited $1 million in 24 hours from trades related to Google’s 2025 Year in Search rankings. The trader, going by the pseudonym AlphaRaccoon, had an astonishing success rate, with 22 out of 23 predictions paying off.

The trend immediately raised red flags. The accuracy was statistically highly improbable, and the massive size of the positions led observers to label it a clear case of insider trading. Could it have been an employee at Google with knowledge of the search trends report before it was released?

Then, in January 2026, an anonymous trader on Polymarket put $32,000 on the downfall of Venezuelan dictator Nicolás Maduro just hours before President Trump announced his capture. That trader pocketed more than $400,000. But the size of the trade and the timing were simply too good to be true. Experts immediately suspected the trader had insider knowledge of the U.S. military raid in the South American country.

However, the most serious case comes from Israel. Two individuals there have been indicted by the state for using classified military intelligence—state secrets—to profit on Polymarket.

The pair (an Israeli Defense Forces reservist and a civilian) placed highly accurate wagers on military operations last year. This included correctly predicting the exact timeframe in which Israel launched strikes on Iran in June 2025.

They earned over $150,000 in profits. Now, they are facing charges for “severe security offenses,” as well as bribery and obstruction of justice.

Kalshi, a rival prediction market, commented on insider trading when pressed following the Maduro case in January. In a statement released to CBS News New York, the company said:

“Kalshi explicitly prohibits insider trading of any form, including government employees trading on prediction markets related to government activity. We’re looking at the specifics of the bill, but we already ban the activity it cites and are in support of means to prevent this type of activity. Market integrity is integral to the functioning of any US regulated exchange. Activity from the past few days has occurred on an unregulated exchange.”

Both Kalshi and Polymarket are now federally regulated by the Commodity Futures Trading Commission (CFTC). Polymarket secured this approval in late 2025. Under this regulation, both platforms use traditional stock-market surveillance. They also set strict position limits to prevent users from trading on non-public information.

But for Polymarket, this feels more like ticking boxes than actively tackling the problem.

In fact, Polymarket treats insider trading as a feature, not a bug. In a recent interview, Polymarket CEO Shayne Coplan defended the practice of trading on non-public information, telling CBS News that insiders “having an edge on the market is a good thing.”

Coplan has repeatedly argued that allowing insiders to profit speeds up the discovery of the truth, noting that the platform “creates this financial incentive for people to go and divulge the information to the market.”

The difference between the two platforms is fundamental. Kalshi operates as a traditional, centralized financial exchange, much like a stock market. It runs on fiat US dollars and requires identity verification.

Polymarket, on the other hand, is a decentralized platform built on the Polygon blockchain. It runs exclusively on cryptocurrency (USDC), allowing users to connect and trade via Web3 wallets. Polymarket is highly pseudonymous. Naturally, that level of anonymity makes it the platform of choice for anyone wanting to hide their identity, such as someone trading on non-public information.

In response, Representative Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026. The bill seeks to outlaw wagering on prediction markets by members of Congress and other insiders.

It aims to: “prohibit federal elected officials, political appointees, Executive Branch employees, and congressional staff from buying, selling, or exchanging prediction market contracts tied to government policy.”

Kalshi has responded to media requests regarding the bill, confirming they support it. Polymarket, on the other hand, has not.

Despite the controversy, the federal government currently shields these platforms. Michael Selig, the recently appointed Chair of the CFTC, has come out in vocal support of these platforms. In the face of a growing onslaught of state-level lawsuits attempting to ban the sites as unlicensed gambling, the CFTC has stepped in to protect them, warning states that prediction markets are federally regulated financial tools, not local sportsbooks.

Speaking of this support, Polymarket CEO Copland has said: “This [administration] is very pro-innovation, and pro-crypto, and pro-Polymarket, which is amazing. I need help navigating that, right? I’m a young entrepreneur.”

So it is hard to see Polymarket being reined in for the time being. The administration in the United States is the most pro-crypto ever. But worldwide, they will certainly face further scrutiny over the ever-increasing cases of insider trading on Polymarket.

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