8 min
April 22, 2026
Prediction markets provide valuable intel, but can also incentivize insider trading. Here’s how platforms are fighting back.
written by
Andrew Fenton , Staff Editor
reviewed by
Ailsa Sherrington , Staff Editor
Ever since Polymarket correctly tipped a Donald Trump victory in 2024, months before the polls and pundits did, prediction markets have gone from strength to strength.
Monthly trading volumes grew $4.3 billion in the lead up to the election, and have continued sharply upwards to $10.6 billion in March this year.
But allegations of shady insider bets, on everything from the content of MrBeast videos to the timing of the Iran war, began to dog both Polymarket and Kalshi as they became more popular.
Karoline Thomsen, international law and relations researcher at the University of New South Wales, says there is evidence that prediction markets can surface and aggregate useful information — but they can also incentivize insider trading.
“I think with Polymarket, what you also get are bets that lend themselves to people misusing insider information,” she says. “At that point, you’re not predicting what is going to happen, you are telling other people, or signaling to other people, what is going to happen. ”
</p><p>” data-large-file=”https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2026/04/MrBeast.jpg” src=”https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2026/04/MrBeast.jpg” alt=”MrBeast” ><figcaption>MrBeast builds a boat to escape a deserted island. (MrBeast/YouTube)</figcaption></figure><h2><strong>What prediction markets do in theory</strong></h2><p>The promise of prediction markets, as laid out by economist Robin Hanson, is that wagering on an outcome will reveal people’s actual beliefs — rather than saying the “right” things to pollsters — aggregate dispersed information and provide the crowd’s informed best guess about a future outcome expressed as a price. </p><figure><img data-lazyloaded=)
90% correct predictions, from a month out, on resolved markets.Elisabeth Diana, communications head for Kalshi, explains prediction markets are a valuable public service.
“Around 70% of people on Kalshi actually just come to see the odds, to see the forecasts. They don’t trade,” she tells Magazine.”I mean, the value is enormous. They see it as a source of truth.”
In an ideal world, prediction markets would be based on informed traders using public, but not widely known, knowledge. The Pentagon Pizza Report is a good example — it gives an indication of whether everyone at the Pentagon is working late, which raises the chance that something big is about to happen.
Diana gives another example. “If you parked outside a Walmart and watched everyone come in and out every day for three weeks, you’d have a better sense of how Walmarts are doing. That’s not illegal information,” she says.
When does information cross the line to become ‘inside information’
But it becomes insider trading when someone misuses “material nonpublic information.”
“A lot of times, for example, if you’re permitted to share information publicly, you can trade on it. If you’re not permitted to disclose it, you can’t trade on it,” Diana says.
“For example…. if you’re a dancer employed by Bad Bunny at the Super Bowl and you traded on information about his first song, that is insider trading because you were employed.”
However, if you were standing outside the stadium and heard Bad Bunny rehearsing a song, betting on that information is fine.
“That is legitimate, because that is public. Anyone can do that.”
Nobel Peace Prize and Google’s 2025 Year in Search rankings.Prediction markets also create scenarios where a single actor can affect the outcome. Coinbase CEO Brian Armstrong famously read out the entire list of words that pundits had bet he might say during an earnings call.
But it’s been the misuse of classified information in wartime that’s drawn the most concern.
On Jan. 3, in the hours before US troops were deployed to Venezuela, a newly created Polymarket account bet on that eventuality and picked up $400,000 in winnings. Ahead of the US attack on Iran, another suspicious account pocketed $553,000. There have even been arrests, with an Israeli Defense Forces reservist and a civilian charged for misusing classified information about Israel’s April 2024 strikes on Iran to place bets on Polymarket.
Democrat congressman Eugene Vindman wrote to Polymarket CEO Shayne Coplan earlier this month to demand the platform preserve all records related to bets on national security, from IP addresses to metadata.
“The use of sensitive or classified information to place bets on military actions endangers and undermines national security and risks the lives of our men and women in uniform. It is immoral, dishonest, vile, and traitorous,” he said, arguing prediction markets also incentivize military leaders to take actions that line their own pockets.
“Moreover, large bets placed on these markets in the lead-up to military action can signal U.S. intentions to adversaries, compromising operational security. This endangers the lives of the troops carrying out those missions and jeopardizes critical military objectives.”
Kalshi bans insider trading, verifies all users
Kalshi has specific prohibitions against insider trading. AI systems scan the platform looking for irregularities. But the real blocker is the fact that all users are KYC verified.
Eric Swalwell, winning the California governor’s race. Cloobeck had previously bet on his own chances of winning before he dropped out.And, shortly after this story was first published, Kalshi announced it had just handed out three 5-year suspensions to candidates in Minnesota, Virginia and Texas for better on their own campaigns.
That month, Kalshi also suspended a video editor who worked for YouTuber MrBeast, for two years for alleged insider trading, and even alerted Federal authorities. The systems had flagged the editor’s “near perfect” success betting on markets related to MrBeast.
Polymarket has also rewritten its rules to state that users cannot trade on contracts where they might possess confidential information or could influence the outcome of an event.
A Polymarket account named “ricosuave666” made $155,000 betting on Israel’s June 2025 strikes on Iran, and then resurfaced in January to place new bets. It was flagged by analysts for suspicious activity and its account was deleted. However, in theory, there’s nothing to prevent the anonymous user behind it from opening a new account.
Polymarket declined to be interviewed for this story or to provide comments.
