The US is betting on AI to catch insider trading in prediction markets
Summary
The US Commodity Futures Trading Commission (CFTC) is increasing its efforts to detect and stop insider trading on prediction markets, especially those based offshore. The agency uses artificial intelligence (AI) and blockchain tools to spot suspicious trades and plans to take legal actions against offenders.Key Facts
- Prediction markets saw suspicious trading around events like the Venezuela raid and the Iran War.
- Polymarket’s crypto-based platform operates offshore and is blocked in the US, but some traders use virtual private networks (VPNs) to access it from the US.
- The CFTC is hiring more staff and using AI tools to analyze large amounts of trading data for signs of manipulation.
- Tools used include proprietary systems, Chainalysis (for crypto tracing), and Nasdaq Smarts (for market abuse detection).
- US-based Kalshi and offshore Polymarket have both taken steps to stop insider trading by suspending users and updating rules.
- Polymarket partnered with Chainalysis and Palantir to improve market oversight.
- Several US lawmakers have expressed concern about possible insider trading on war-related prediction contracts and asked the CFTC to investigate.
- The CFTC chairman said the agency is working on hundreds or thousands of insider trading tips.
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