"Did They Make Money Off War Intelligence?" U.S. Takes Aim at Prediction Markets

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\r\n[Financial News] U.S. judicial and regulatory authorities have launched a sweeping investigation as suspicions spread that political and military information from inside the U.S. government was used for prediction-market betting. The concern is that sensitive geopolitical events, including Iran's military operations and efforts to change Venezuela's regime, may have leaked into prediction markets and commodity futures markets.
The Wall Street Journal (WSJ) reported on the 16th, local time, that the United States Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) have recently been issuing information requests to prediction-market platforms such as Kalshi and Polymarket. Prediction markets are platforms where users bet on the outcomes of political, social, and military events, and they have been growing quickly in the United States.
Authorities are paying particular attention to military and political events involving Iran and Venezuela. Kalshi's internal investigation team is reportedly looking into whether spouses of U.S. service members used undisclosed military information to place bets.
Suspicious trading activity has also surfaced in the financial markets. Prosecutors and regulators are examining a surge in crude oil futures trading on March 23. Just before U.S. President Donald Trump posted on Truth Social that he would hold off on attacking an Iranian power facility, oil futures volume spiked. After that, global oil prices fell sharply and the New York Stock Exchange (NYSE) rallied.
Authorities suspect that the information may have been leaked in advance. The White House also reportedly warned staff the following day not to use their positions to speculate in the futures market.
Last month, a U.S. service member was arrested on suspicion of making about $400,000 in profits on Polymarket by using information about an operation to oust former Venezuelan President Nicolás Maduro Moros.
David Miller, the CFTC's enforcement director, suggested at a recent university lecture that more investigations could follow, saying, "This is not the only case currently under way." He added that "serious problems are emerging in prediction markets, and they could undermine market trust and integrity."
Platform operators are also responding. Kalshi has independently investigated more than 200 cases this year and referred some to law enforcement. Last month, it fined three House candidates who had bet on the outcomes of their own districts and suspended their accounts. Polymarket said it had also identified about 100 suspicious wallets through blockchain transaction tracking and reported them to authorities.
However, some analysts say actual punishment may be difficult. Existing insider-trading rules were designed mainly for the stock market, making them hard to apply directly to prediction markets based on political and military events.
Record-keeping practices are also drawing criticism. Jay Clayton, the U.S. Attorney for the Southern District of New York, recently criticized prediction-market platforms at a hedge fund event, saying they are not properly preserving user records needed to track illegal activity.
In particular, Polymarket, which is headquartered overseas, officially blocks access from U.S. users. But many users are reportedly bypassing the restriction through virtual private networks (VPNs), raising concerns about regulatory blind spots, WSJ reported.
The United States Senate banned lawmakers from trading on prediction markets last month, but most federal agencies still do not have clear rules restricting such transactions.
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km@fnnews.com Kim Kyung-min Reporter