NEW YORK: A key Commodity Futures Trading Commission (CFTC) official says the agency will use its powers to root out insider trading in prediction markets, as concerns about suspicious activity on the exchanges grow.
“Unfortunately, there’s a myth in mainstream media and social media that insider trading doesn’t apply in the prediction markets,” CFTC enforcement director David Miller said at a panel at New York University. “That is wrong.”
The multibillion-dollar industry has surged over the past year, despite legal challenges from state officials who argue the federally-regulated exchanges should fall under their jurisdiction.
That rapid expansion has also prompted concerns about insider trading as some wagers are thin enough that a single trader can move prices.
Prediction market customers can place wagers on everything from college basketball games to geopolitical events.
Earlier this year, a trader on Polymarket made approximately US$400,000 betting on the ouster of former Venezuelan leader Nicolas Maduro, with many of the trades placed just before President Donald Trump publicly announced the United States had captured him.
Some lawmakers have since introduced bills seeking to crack down on insider trading and rein in the industry.
The CFTC under the Trump administration has generally embraced prediction markets and the exchanges have recently taken a more proactive approach to insider trading.
Both Kalshi and Polymarket announced new rules last week, as the public backlash has grown. — Bloomberg
