Polymarket Has Investigated 'Dozens' of Midterm Election Bets: Report

Polymarket has investigated "dozens" of bets on its midterm election markets for possible insider trading and manipulation, the company's head of global intelligence and investigations, Shana Bautista, told NPR.

At least two of those investigations have been referred to the Commodity Futures Trading Commission, NPR reported, citing a person familiar with the probes.

Bautista, a former FBI official and crypto analyst who joined Polymarket in June, said her team of 16 is policing election bets with a new surveillance system ahead of the November 3 vote.

"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 team monitors both Polymarket's U.S.-regulated exchange, which requires users to verify their identities, and Polymarket International, where users can trade anonymously with crypto. Even so, 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.

The system pulls in data from social media, Federal Election Commission filings, crypto companies, banking partners and statistical models, and alerts Bautista when a user trips enough internal red flags. "We're getting hundreds of alerts a day," she said. She declined to share the specific criteria, citing system security.

Election markets are especially vulnerable, Barnard College economics professor Rajiv Sethi told NPR, because they "have the possibility of being a self-fulfilling prophecy," with perceptions of a candidate's momentum able to influence the result.

Kalshi, Polymarket's main rival, launched its own FEC-based system in May to block campaign staffers from betting on elections. In June, it added employment disclosures for high-risk markets and a risk-scoring framework, saying it had opened more than 150 investigations that year and referred more than 20 cases to law enforcement. One campaign staffer told NPR they had found a way around Kalshi's block.

Insider trading on prediction markets

Election insider trading drew scrutiny in May, when campaign staffers told NPR they had made "thousands" betting on their own candidates using tips about unreleased polls. "Because you have all this information and knowledge that isn't publicly available yet, it's almost foolish not to bet on it before it's made public," one said. Jeff Le Riche, a former CFTC trial lawyer, told the outlet that such trades "could potentially be a violation" of the law.

Polymarket partnered with blockchain analytics firm Chainalysis on market surveillance tools in April, days after an active-duty U.S. Army soldier was charged with using classified information about the raid to capture Nicolás Maduro to bet on Polymarket. The soldier, who has pleaded not guilty, allegedly placed more than $33,000 in bets and won nearly $410,000. Polymarket said it detected the activity and reported it to authorities before the arrest.

NPR reported that the CFTC has done little to police prediction markets, largely leaving the work to the companies. In September, though, CFTC staff warned that "mention markets," contracts on whether a named person says certain words or attends an event, should be presumed readily susceptible to manipulation. The advisory came three weeks after the agency fined a teleprompter operator who traded on speeches he had already read.