Polymarket has looked into "dozens" of bets on its prediction markets tied to the midterm elections, according to Shana Bautista, the company's head of global intelligence and investigations.
A person familiar with the probes, who was not authorized to discuss them publicly, said at least two of the cases have been referred to the U.S. Commodity Futures Trading Commission, which regulates the platform.
The investigations into suspected insider trading and manipulation come as Polymarket and its main rival, Kalshi, have surged in popularity over the past year. The industry also faces significant legal challenges from states, along with pushback from lawmakers who argue that betting on election outcomes poses serious risks to democracy.
Concerns about insiders have already surfaced. In April, Kalshi banned and fined a handful of political candidates for betting on themselves. A month later, NPR reported that campaign staffers had made "thousands" by using insider polling information to wager on their own candidates on platforms including Polymarket and PredictIt.
Bautista, a former FBI official and cryptocurrency analyst, joined Polymarket in June. She said her team of 16 and a new election surveillance system are actively monitoring bets ahead of the Nov. 3 midterms. "If you have information that you have a duty to protect, don't trade on it," she said. "It's explicitly against our terms of use on both platforms, but also is against the law. If you decide that you are smarter and can do it, we will find you."
Her work covers both the U.S.-regulated version of Polymarket, which requires users to verify their real identities, and Polymarket International, which is largely unregulated and allows anonymous trading with cryptocurrency. Bautista said crypto trades are rarely fully anonymous. "There's never been a case that we work where we haven't been able to identify, potentially, who these people are," she said.
According to Bautista, the surveillance system gathers "gigabytes" of data on each user from social media, Federal Election Commission records, cryptocurrency firms, banking partners, statistical models and other public sources. When a user trips a certain number of internally defined red flags, an alert goes to her phone, and she said hundreds arrive each day. She declined to share the specific criteria, citing system security. She added that insider trading and manipulation look the same in any financial market, though old tactics are now being applied through a new channel.
Kalshi announced its own surveillance system in May, which also draws on FEC data and is meant to block campaign staffers listed by the FEC from betting on elections. In July, the company said it had blocked "dozens" of staffers, though at least one told NPR they had found a way around the restriction. That staffer shared trade records and spoke anonymously for fear of harming future job prospects.
Rajiv Sethi, an economics professor at Barnard College at Columbia University who has studied prediction markets for decades, said election markets are especially vulnerable. "[Election prediction markets] have the possibility of being a self-fulfilling prophecy," he said, noting that perceptions of a candidate losing momentum can influence the actual result.
Bautista said her team studies past cases and tries to think like would-be manipulators, feeding what it learns back into its detection tools. Meanwhile, the CFTC has done little to police these markets as they have grown over the past two years, largely leaving the work to the companies themselves.
