Prediction Markets: Every Crime on Record, Zero Convictions

Opening

Dear reader, here’s what happened on December 3, 2025. An anonymous account known as “Google Whale” deposited $3 million into Polymarket and placed 23 bets on Google’s “Year in Search” rankings. The result: 22 correct calls and $1.15 million in profit within 24 hours. One bet alone—on the artist d4vd, whose odds of making the rankings were just 0.2%—earned $200,000. There’s no explanation for that other than knowing something in advance.

But here’s the more surprising part. Nothing happened after this incident. Blockchain technology records every transaction on a public ledger. The evidence is sitting there in plain sight, yet as of February 2026, the number of federal indictments for prediction-market insider trading in the United States stands at zero.

A ₩60 Trillion (~$43.6B) ‘Legal Gray Zone’

Prediction markets are platforms where people bet money on the outcome of future events. Questions like “Will interest rates rise next month?” or “Will OpenAI launch a new model?” trade as contracts priced between $0 and $1, and the price itself represents probability. If a “Yes” contract trades at $0.70, the market is pricing that outcome at 70%. Honestly, though, I think “prediction market” is a generous name for it—this is closer to an odd-or-even betting market. Go look at what’s actually listed and you’ll find bets dressed up as polls on everything from whether a war or accident will happen this week to the most trivial questions imaginable.

The growth rate here is stunning. In 2025, combined trading volume across Polymarket and Kalshi topped $40 billion (~₩55 trillion). That’s dozens of times larger than early 2024. The 2024 U.S. presidential election was the catalyst—election-related markets alone reached over $3.3 billion. Both platforms are now in talks for further funding at valuations around $20 billion each.

The problem is that the range of things you can bet on here is far broader than in the stock market—AI product launch dates, presidential elections, military operations, even a YouTuber’s next video. The scope of what could count as inside information is effectively infinite. And because Polymarket runs on blockchain, trades can be anonymous. Even if someone profits from inside information, there’s no way to immediately know who they are.

The Cases Keep Coming: From OpenAI to Military Secrets

OpenAI — Tech’s First Insider-Trading Firing

This is what WIRED reported in February 2026. OpenAI fired an employee for trading on prediction markets using inside information. Fidji Simo, CEO of OpenAI’s Apps division, sent an internal notice confirming the firing. It’s the first confirmed case of a major tech company terminating an employee over prediction-market insider trading.

The analysis by financial data platform Unusual Whales, which crunched blockchain data, is even more striking. Since March 2023, it has identified 60 wallets and 77 suspicious trades tied to OpenAI-related events. In one pattern, 13 brand-new wallets with zero trading history appeared simultaneously 40 hours before the ChatGPT browser launch and placed $309,000 in bets. In another, a one-off account bet on Sam Altman’s reinstatement right after his November 2023 ouster and made $16,000. These patterns kept repeating.

Israel — $150,000 from Military Secrets

On February 12, 2026, Israel filed the world’s first criminal indictment tied to prediction markets. An IDF (Israel Defense Forces) reservist and a civilian were charged, in a scheme where the reservist passed classified operational information gathered during military service to the civilian, who then placed the bets on Polymarket. Together they placed four bets on the timing of Israel’s June 2025 airstrike on Iran and made roughly $150,000. The charges include serious security breaches, bribery, and obstruction of justice.

In an official statement, Israel’s Ministry of Defense stressed that this kind of conduct poses a real threat to IDF operations and national security. A structure where military secrets get converted into cash on a public betting market—this goes beyond financial fraud into a genuine security vulnerability.

Venezuela, MrBeast — Insiders Everywhere

In January 2026, an account called “Burdensome-Mix” bet $34,000 right before the Trump administration’s operation to oust Venezuela’s Maduro, and walked away with over $400,000. Amid allegations of government insider information, U.S. Representative Ritchie Torres introduced legislation¹ banning insider trading on prediction markets.

Around the same time, Kalshi caught a video editor for YouTuber MrBeast trading on inside information, and handed down a two-year ban and a $20,000 fine. Small in scale, but significant as the first insider-trading sanction ever issued by a CFTC²-registered exchange.

Tech company employees, soldiers, YouTuber staff, and people suspected of being government officials—the structure is built so that anyone with inside information can profit from this market.

Why No One Gets Punished

The answer to this is structural. The SEC (Securities and Exchange Commission) is what catches insider trading in stock markets, backed by Rule 10b-5, a regulatory framework refined over 90 years. The core logic is a breach of “fiduciary duty”³—if you break your duty of loyalty to a company and profit off inside information, you get punished.

But prediction market contracts aren’t “securities.” They’re classified as “event contracts” or “swaps,” so SEC insider-trading law doesn’t apply to them directly. Instead, they fall under the CFTC’s jurisdiction, and in commodity markets, trading on information you happen to possess is legal in many cases to begin with. The legal framework itself is different.

The CFTC’s practical limitations are significant too. On February 25, 2026, it issued its Prediction Markets Advisory, reaffirming its enforcement authority over insider trading, but aside from SDNY (Southern District of New York) U.S. Attorney Jay Clayton signaling upcoming prediction-market fraud prosecutions, there has been no actual federal enforcement yet.

The most realistic legal path is the DOJ (Department of Justice) applying fraud statutes. There’s already a precedent: prosecutors applied fraud charges to Coinbase employee Ishan Wahi’s insider trading, resulting in a two-year prison sentence. Former SEC Chairman Jay Clayton, when asked about applying fraud law to prediction-market participants, responded in a way that suggested prosecutions would happen.

Blockchain surveillance tools are already catching the patterns. A platform called Polysights says 85% of the trades it flags actually end up winning. Unusual Whales tracked 77 suspicious OpenAI-related trades. The transactions are all visible—what’s severely lacking is the manpower to gather the off-chain evidence⁴ (exchange subpoenas, communication records, and the like) needed to connect them to actual identities.

Oz’s Lens

Honestly, I think there’s a fundamental contradiction baked into the prediction market business model itself.

Polymarket CEO Shayne Coplan once said in a 60 Minutes interview that insider trading is “super cool.” His logic: markets get more accurate when people with information participate. UCLA’s Professor Andrew Verstein makes a similar argument—block insiders, and information-rich traders leave, dragging down the market’s predictive accuracy.

But step back and this logic reveals exactly what a prediction market really is. If “accurate prediction”—the market’s core value proposition—depends on insider participation, then this is, in effect, a structural coin-flip gambling operation designed to monetize information asymmetry. Ordinary participants estimate probabilities, while insiders sit at the same table already knowing the answer. How is that any different from a casino dealer betting after peeking at the cards?

This contradiction eventually erodes trust in the market. Right now, the pitch of “accurate prediction” is drawing in investors and users, but in a market that structurally tolerates insider trading, ordinary participants end up as the suckers supplying liquidity. Dartmouth’s Professor Eric Zitzewitz has made the same point: most insider-trading profits come out of the pockets of ordinary participants providing liquidity through limit orders.

The surveillance infrastructure—blockchain—already exists, and pattern-detection tools are catching suspicious trades in real time. The technology is ready. What’s missing isn’t technology; it’s the will and the institutions to actually go after this. Of course, there are plenty of conspiracy theories floating around about why nobody’s cracking down… but that’s not really my lane, so I’ll leave it there.

Closing

Here’s the summary. Prediction markets have already entered the mainstream financial system at a scale of ₩55 trillion, and the structure allows anyone with inside information—corporate employees, soldiers, government officials—to profit from it. Traditional stock markets, despite 90 years of insider-trading regulation, still haven’t fully stamped it out, and prediction markets haven’t even completed a month since taking their first regulatory step.

Under current Korean law, it’s difficult to legally operate a prediction market platform like this—it could be classified as quasi-gambling. But cases of Koreans accessing global platforms via VPN have already been reported. If this market keeps growing, Korea will eventually have to take a position: regulate it, allow it, or keep pretending not to notice, as it’s doing now.

If you want to dig deeper into this topic, I’d recommend starting with the CFTC’s official advisory document in the references below. It’s the most direct way to see how the regulator itself views this market.

References & Further Reading

• WIRED, “OpenAI Fires an Employee for Prediction Market Insider Trading”, Feb 27, 2026. : The original report on the OpenAI firing, including Unusual Whales’ analysis data.
• CFTC, “Prediction Markets Advisory”, Feb 25, 2026. : The CFTC’s official advisory reaffirming its enforcement authority over prediction-market insider trading, including two Kalshi disciplinary cases.
• The Jerusalem Post, “Israel indicts reservist, civilian for using classified information to bet on Polymarket”, Feb 12, 2026. : Covers the world’s first criminal indictment tied to prediction markets.
• Rep. Ritchie Torres, “Public Integrity in Financial Prediction Markets Act of 2026”. : The full text of the bill introduced in the U.S. House to ban insider trading on prediction markets.
• Sidley Austin LLP, “U.S. CFTC Signals Imminent Rulemaking on Prediction Markets”, Feb 2026. : A law firm’s analysis of CFTC Chair Mike Selig’s four-point regulatory agenda.
• CoinDesk, “Suspected insiders make over $1.2 million on Polymarket ahead of U.S. strike on Iran”, Feb 28, 2026. : Covers suspected insider trading ahead of the Iran strike and Bubblemaps’ wallet cluster analysis.
• Gizmodo, “Tracking Insider Trading on Polymarket Is Turning Into a Business of Its Own”, Jan 12, 2026. : An interview with Polysights founder Tre Upshaw, exploring how insider-trading surveillance on Polymarket is becoming a business in its own right.

The author, Kwangseob Ahn, is a professor of business administration at Sejong University and lead consultant at OBF (Oswarld Boutique Consulting Firm). He teaches statistics and data analysis — business data management and business analytics — while leading GTM and AI strategy consulting in the field, designing the seam between technology and business. He has published academic research on a memory architecture for AI dialogue systems (HEMA) and runs Daily Arxiv, a daily curation of global AI papers. He holds a master’s from Korea University’s Graduate School of Technology Management and a KMBA. He is the author of Homo Brainless: The People Who Outsource Their Thinking.

Footnotes

1. Public Integrity in Financial Prediction Markets Act: A bill introduced by U.S. Representative Ritchie Torres in 2026. It explicitly bans government officials from trading on prediction markets using non-public information. ↩

2. CFTC (Commodity Futures Trading Commission): The U.S. Commodity Futures Trading Commission. It’s the regulatory body overseeing futures, swaps, and now prediction markets (event contracts). If the SEC watches over stocks, the CFTC watches over these derivatives markets. ↩

3. Fiduciary Duty: The duty of loyalty a company insider owes to the company and its shareholders. In stock markets, breaching this duty is the core reason insider trading is illegal. In prediction markets, this concept doesn’t clearly apply, which is a major source of the regulatory gap. ↩

4. Off-chain Evidence: Evidence that exists outside the blockchain and isn’t recorded on it. Confirming who’s behind a wallet address requires off-chain evidence like exchange subpoenas, communication records, and IP tracing—and gathering that requires legal action from regulators. ↩