Prediction Market Insider Trading Drawing Increased Scrutiny

The effort to uncover insider trading within prediction markets is reportedly gaining steam.

That’s according to a report by Bloomberg News Wednesday (Jan. 21), which cites the example of a new tool from financial data provider Unusual Whales. It examines the prediction platform Polymarket for unusual activity and possible insider bets.

“We thought prediction markets were almost a required expansion for us because the next big insider trade might not be in Congress, it might not be in the stock market, it may be in prediction markets,” CEO Matt Saincome told Bloomberg.

The report notes that outcry over inside trading on prediction platforms was sparked by some highly successful bets placed just ahead of Nicolás Maduro being ousted as Venezuela’s president earlier this month.

Among those pushing back is Rep. Ritchie Torres (D-N.Y.), who has proposed a bill banning barring federal officials from trading contracts tied to policy outcomes if their jobs give them access to pertinent, non-public information.

In related news, prediction market Kalshi is facing a preliminary injunction that may bar it from including sports and related event contracts on its platform in Massachusetts. The injunction will block the company from accepting those contracts from customers in the state until the company obtains a license from the Massachusetts Gaming Commission and adheres to other state laws covering sports betting.

“The Court has made clear that any company that wants to be in the sport gaming business in Massachusetts must play by our rules — no exceptions,” Massachusetts Attorney General Andrea Joy Campbell said in a news release.

“Today’s victory marks a major step toward fortifying Massachusetts’ gambling laws and mitigating the significant public health consequences that come with unregulated gaming.”

Both Kalshi and Polymarket are now multi-billion dollar companies, and, as covered here late last month, helped drive a 25% increase in FinTech funding in 2025.

Writing about the industry in October, PYMNTS argued that despite the “appearance of financial-market sophistication,” prediction markets still have troubling parallels with gambling.

“That is most apparent when the event contracts track sports competitions, anecdotal political outcomes or entertainment awards,” that report said. “Such structures can resemble bets more than hedges on commodity futures.”

While the structure of these markets aligns more with trading than betting, PYMNTS wrote, it also means participants might not be protected by the “responsible-gaming guardrails, or by the licensing oversight intended to safeguard state-licensed gamblers.”