Prediction markets were having a field day last year. On Polymarket. People got rich. Fast. They bet on the raid on Venezuela. Then Iran. It felt like a new golden age. A chaotic one. Traders used timing that was… suspicious.
Was it insider trading? Likely. Did anyone care? Maybe not.
Polymarket operates offshore. It runs on crypto. Technically, US laws don’t touch it directly. So the bad actors shrugged. The US government stayed quiet. Or so we thought.
Not anymore.
The Watchers Are Back
The Commodity Futures Trading Commission is watching. Very closely. Michael Selig. CFTC chairman. He didn’t mince words with WIRED.
“We’re going to find them. And we’re going to bring actions.”
Selig spoke from Washington, DC. His agency is lean. Understaffed. But they’re not doing this manually anymore.
AI to the rescue.
The CFTC is leaning into automation. Hard. They feed mountains of trading data into these systems. The AI flags patterns. It spots manipulation. It tells them who needs a subpoena.
“You’ve got so much data. When we feed it into AI. We get really great information.”
Selig says it helps them understand where to dig. Who to chase. It’s not magic. It’s math. But it works.
They don’t just build their own tools. They buy them too. Chainalysis for the crypto stuff. Nasdaq Smarts for the centralized markets. Selig didn’t name the other AI tools. Declined to share specifics. That’s okay. We get the picture.
The CFTC isn’t just looking anymore. It’s hunting.
The Rivals Get Scared Too
Polymarket isn’t alone in feeling the heat.
Kalshi. Their US-based competitor. Kalshi is shouting about catching bad guys now. They suspended customers. Penalized them. Eagerly announced it to the world. They want you to know they’re clean.
Polymarket had its own wake-up call. Back in April. People got angry. Accusations of insider trading flew around. The company partnered with Chainalysis then. A move to look responsible.
CEO Shayne Coplan used to think insider trading was fine for prediction markets. He liked the efficiency of it. Spring changed that. He changed the rules. Partnered with Palantir for US sports markets. Chainalysis handles the offshore side.
Chainalysis likes the arrangement. Spokesperson Maddie Kenney says they enrich the data. They organize the chaos. For Polymarket and the CFTP alike. It sounds like a profitable deal for them.
Beyond the Borders
Why the sudden push? Scrutiny. Lots of it.
Connecticut senator Chris Murphy thinks White House staff are trading on war contracts. Seven members of Congress asked the CFTP to look at overseas markets. They called trades on military action “morally obscene.” They wanted action.
Selig told Congress they’re getting tips. Hundreds. Maybe thousands.
Here is the hard part. Jurisdiction.
The CFTC wants to use extraterritorial jurisdiction. To go after Americans on offshore sites like Polymarket. Using VPNs. Sneaking past the block.
Selig is cautious. He says they only use it in “extreme circumstances.” Court challenges are real. They could weaken future cases.
The 2010 Dodd-F Frank Act gives them some leeway. Foreign swap activities affecting the US. But if they’re not sure they’ll win? They pass it on.
“We’re constantly referring cases,” Selig says.
To who? Foreign regulators. They won’t say which cases. But they admit it’s common.
One Catch. For Now.
Has anyone actually gone down?
Yes. One man.
On April 23. Federal agents arrested a US Army special operations soldier. He made bets on Polymarket last year. Specific ones. Tied to the capture of Nicolas Maduro in Venezuela.
After the arrest, Polymarket said they had flagged the trade. Smart. Or convenient.
Selig insists this is just the beginning. “We will identify wrongdoers,” he says. Big or small.
So the net is closing. AI is scanning the blockchain. The CFTC has its sights set on your VPN tunnel.
It feels different now. Heavier.
The golden age might be ending. Or maybe it’s just getting harder to enjoy.
