Polymarket has investigated dozens of bets on its midterm election markets, and at least two of those cases have been sent to the Commodity Futures Trading Commission (CFTC). Ahead of the November 3 vote, that puts the best-known election betting market under a spotlight it cannot dodge.
Key points:
- Polymarket investigated dozens of midterm election bets for possible insider trading and manipulation, its investigations chief told NPR.
- At least two of those cases were referred to the CFTC, according to a person familiar with the probes cited by NPR.
- Its new surveillance system flags hundreds of alerts a day, drawing on campaign finance, crypto and banking data.
The investigations are run by Shana Bautista, Polymarket's head of global intelligence and investigations. She is a former FBI official and crypto analyst who joined the company in June, and she leads a team of 16 that polices election bets with a new surveillance system. The system pulls in social media posts, Federal Election Commission filings, data from crypto companies and banking partners, and statistical models, and it alerts her team when a user trips enough internal red flags. Her warning to would-be insiders was blunt. "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."
The system watches both sides of Polymarket. Its United States exchange is regulated and requires users to verify their identities, while its international platform lets users trade anonymously with crypto. Bautista said that anonymity is thinner than it looks, because crypto trades are rarely fully anonymous in practice. Election markets deserve that extra watch, because they can become a self-fulfilling prophecy: if traders believe a candidate is surging, that belief itself can shift momentum. Rival platform Kalshi has faced the same problem, launching its own system in May to block campaign staffers from betting on elections, then adding employment disclosures and risk scoring in June after opening more than 150 investigations this year and referring more than 20 cases to law enforcement. Even so, one campaign staffer told NPR they had found a way around Kalshi's block, which shows controls alone do not end the risk.
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What happens next?
This is not the first time election betting has drawn scrutiny. In May, campaign staffers told NPR they had made thousands betting on their own candidates using tips about unreleased polls. In April, Polymarket partnered with blockchain analytics firm Chainalysis on market surveillance tools, days after an active-duty United States Army soldier was charged with using classified information about the raid to capture NicolΓ‘s 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, and Polymarket said it detected the activity and reported it to authorities before the arrest. In September, 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. That advisory came three weeks after the agency fined a teleprompter operator who traded on speeches he had already read.
For traders, three things matter next. First, the November 3 vote itself, since the investigated markets are live right now and any new disclosure could move prices fast. Second, whether the CFTC acts on the two referred cases, because a referral is not a charge and the agency has so far left most policing to the companies themselves. Third, whether Polymarket or Kalshi tighten their controls further, since each new workaround invites a new rule. The risk is plain: a price that looks like momentum may instead reflect information that was never public, and trading on such information breaks platform rules and can break the law. Until the referred cases are resolved, election-market positions carry an extra layer of uncertainty that has nothing to do with the polls.
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— BitByLine News Desk
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Sources: Decrypt, NPR