Prediction markets like Polymarket and Kalshi are quickly becoming an economic and political force, accruing multi-billion dollar valuations and drawing support from key officials in the Trump administration.<\/p>\n
But backlash to the platforms is spreading \u2014 in Washington and in state capitals \u2014 with accusations of insider trading dogging several midterm election campaigns and accompanying White House military action in Venezuela and Iran and dogging several midterm election campaigns.<\/p>\n
Fault lines over who is in charge of regulation are already emerging, with several frontline Democrats pushing to rein in the companies. In March, California Gov. Gavin Newsom signed an executive order<\/a> barring appointed state officials from using insider information to place bets on prediction markets. Regulation discussions are ongoing in other states, including Arizona and Massachusetts.<\/p>\n Donald Trump Jr., the president\u2019s son, meanwhile, is an adviser for both Kalshi and Polymarket. And both companies are spending big<\/a> to win over the country\u2019s political class, with Polymarket opening a pop-up bar on K Street<\/a>, among other efforts.<\/p>\n Here are some of the most recent incidents that have piqued the anxiety of state and federal lawmakers.<\/p>\n The capture of Nicol\u00e1s Maduro<\/p>\n Federal authorities on Thursday announced the arrest of a U.S. Army special forces soldier they accused<\/a> of using confidential information to place more than a dozen bets on Polymarket tied to the January capture of Venezuelan strongman Nicol\u00e1s Maduro.<\/p>\n Gannon Ken Van Dyke, a 38-year-old soldier who helped plan the Caracas operation, spent roughly $33,000 on the bets, earning more than $400,000 in payouts, the Justice Department said<\/a>. Authorities charged him with unlawfully using confidential government information for personal gain, among other alleged offenses.<\/p>\n The operation saw U.S. forces capture Maduro overnight in his bedroom, before flying the longtime Venezuelan leader to New York City<\/a> to face narco-terrorism charges.<\/p>\n Van Dyke\u2019s alleged actions took advantage of that mission, the government officials argue.<\/p>\n \u201cOur men and women in uniform are trusted with classified information in order to accomplish their mission as safely and effectively as possible, and are prohibited from using this highly sensitive information for personal financial gain,\u201d acting Attorney General Todd Blanche said in a statement Thursday<\/a>. \u201cWidespread access to prediction markets is a relatively new phenomenon, but federal laws protecting national security information fully apply.\u201d<\/p>\n In a social media post Thursday<\/a>, Polymarket called the arrest “proof the system works.”<\/p>\n “Noise aside, the reality is we work proactively with all relevant authorities on any suspicious activity on our marketplace,” Shayne Coplan, the company’s CEO, wrote on X<\/a>. “We flagged this, referred it, and cooperated throughout the process. This happens constantly behind the scenes, despite what many are led to believe.<\/p>\n U.S.-Iran ceasefire<\/p>\n In the hours before President Donald Trump announced a ceasefire with Iran in early April, at least 50 newly created Polymarket accounts spent thousands betting on a temporary peace, according to an Associated Press report<\/a>.<\/p>\n One account, created just 12 minutes before Trump\u2019s Truth Social announcement, made $48,500 on a $31,908 bet that a ceasefire would occur. Another cashed out for a profit of $200,000, the AP reported.<\/p>\n Polymarket also took heat after the U.S.\u2019s initial strikes on Iran<\/a>, with \u201csix suspected insiders\u201d placing bets on the attacks just before they took place, according to Blockchain company Bubblemaps, taking home more than $1 million.<\/p>\n Israeli authorities, meanwhile, charged two people in February for using classified information to place bets about military operations on Polymarket, according to NPR<\/a>.<\/p>\n Congressional bets<\/p>\n On Wednesday, Kalshi announced that it was suspending three 2026 congressional candidates<\/a> from the platform for betting on their own races. Minnesota Democrat Matthew Klein, Texas Republican Ezekiel Enriquez and Virginia Senate candidate Mark Moran were each given five-year bans and faced fines or penalties ranging from roughly $500 to more than $6,000.<\/p>\n Klein, who is running to replace outgoing House lawmaker Angie Craig in Minnesota\u2019s 2nd District, issued an apology on X.<\/p>\n \u201cThis was a mistake, and I apologize,\u201d he wrote<\/a>. \u201cMy experience, like many other Minnesotans, points to the need for clearer rules and regulations for these types of markets.\u201d<\/p>\n Enriquez has not appeared to publicly comment on his wager or suspension.<\/p>\n Moran, a former “FBoy Island” contestant who is running a long-shot bid to challenge Sen. Mark Warner (D-Va.) in Virginia, took a different tack, writing on X that he wanted to be caught<\/a>.<\/p>\n \u201cI traded $100 on myself, knowing this would happen (also knowing that I wouldn\u2019t be vying for the democratic nomination) and the attention it would create to highlight how this company is destroying young men and as Senator I will go after Kalshi and impose significant penalties on them – 25% – a vice tax – to pay down our national debt,\u201d he said.<\/p>\n Elisabeth Diana, Kalshi’s head of communications, said that bringing the bets from Klein, Enriquez and Moran to light is an example of the company’s efforts to stay above board in its regulation efforts.<\/p>\n “As a federally regulated exchange, we prohibit insider trading and market manipulation and have meaningful surveillance and enforcement programs in place,” she said. <\/p>\n Playing with Mother Nature<\/p>\n Several Polymarket traders made thousands of dollars in profits for accurately predicting sudden, anomalous spikes in the temperature at Paris\u2019 Charles De Gaulle airport April 15, according to the Wall Street Journal<\/a>.<\/p>\n M\u00e9t\u00e9o-France, the country\u2019s weather service, is now investigating the incident, which could be tied to tampering.<\/p>\n MrBeast\u2019s editor<\/p>\n In February, Kalshi reported Artem Kaptur<\/a>, an editor for MrBeast, one of the world\u2019s biggest influencers and most popular YouTube creators, to federal authorities for allegedly trading \u201con material, non-public information he obtained because of his employment\u201d regarding the celebrity\u2019s YouTube videos.<\/p>\n Kalshi suspended Kaptur from its platform for two years<\/a> and imposed a financial penalty of more than $20,000. He was fired in March<\/a>.<\/p>\n