US Government Investigates Polymarket for Potential Insider Trading
Three unreported probes reveal regulatory scrutiny on prediction markets.
1CFTC's Secret Investigations
The Commodity Futures Trading Commission (CFTC) launched at least three undisclosed investigations into Polymarket trades, revealed through Freedom of Information Act documents. These probes targeted suspicious activity in event contracts related to Biden-era pardons, Iran geopolitical events, and Google's search rankings. Chairman Michael Selig authorized enforcement divisions to subpoena records and take testimonies. The investigations followed media reports of traders making $300k-$2.4M with improbable 98% win rates on specific contract types.
2The Biden Pardon Trades
In May 2026, the CFTC began investigating unusual Polymarket activity around presidential pardons. One trader netted $300k by correctly predicting Biden would pardon MAGA critics like Liz Cheney and Adam Schiff during his administration's final days. While the investigation order didn't specify suspect trades, it came weeks after NPR reported this anomalous activity. The CFTC granted itself authority to administer oaths and compel document production, indicating serious regulatory concern about potential insider information exploitation.
3Iran Contracts Scrutiny
Two weeks after 60 Minutes exposed a network of accounts making $2.4M on Iran-related contracts, the CFTC opened a formal investigation. The suspicious accounts maintained a 98% win rate on geopolitical event predictions. Former CFTC enforcement chief Joseph Konizeski criticized the agency for reacting to media reports rather than proactive monitoring. This investigation highlights the regulatory challenges posed by prediction markets operating in geopolitical gray areas with potential national security implications.
4Google Insider Trading Probe
A July 2026 CFTC investigation focused on Google-themed contracts after engineer Michele Spagnuolo allegedly made $1.2M using insider knowledge about 2025 search rankings. Documents show coordination with SDNY prosecutors. Google confirmed Spagnuolo's termination but declined further comment. This case tests whether prediction market activity constitutes securities trading or gambling - a legal gray area defendants are exploiting in court. The parallel criminal/civil charges mirror traditional financial market enforcement approaches.
5Polymarket's Regulatory History
The CFTC banned Polymarket's main platform in 2022 before allowing a limited US relaunch in late 2025. Despite this, the company reached a $21B valuation after fundraising led by Trump Jr.'s 1789 Capital. The platform's archrival Kalshi has faced similar scrutiny, referring 32 cases to regulators. Former Rep. George Santos received $71k fines and lifetime bans from prediction platforms for market manipulation. These actions demonstrate regulators' struggle to apply commodities laws to emerging prediction markets.
6Enforcement Actions
Two arrests have resulted from Polymarket investigations: a Special Forces officer allegedly used classified intel to profit $400k from Venezuela-related contracts, while Spagnuolo was arrested traveling to New York. Both face CFTC civil charges and DOJ criminal fraud indictments. Defense arguments that prediction markets constitute gambling rather than securities trading could reshape regulatory jurisdiction. The cases establish precedent for how insider trading laws apply to non-traditional financial instruments.
7Industry Reactions
Polymarket's deputy chief legal officer Olivia Chalos emphasized cooperation with regulators while declining to comment on specific cases. The CFTC's perceived industry friendliness during the second Trump administration has drawn criticism. Legal experts note the difficulty of proving insider trading in prediction markets, where information asymmetries are inherent. The investigations coincide with broader debates about regulating decentralized finance platforms and their intersection with traditional financial laws.
8Regulatory Crossroads
These investigations represent a pivotal moment for prediction markets. The CFTC's reactive approach - prompted by media reports rather than internal monitoring - reveals gaps in oversight of novel financial products. Outcomes will determine whether prediction markets face traditional financial regulations or carve-outs as gambling platforms. With $21B at stake and growing political connections, Polymarket's case could redefine boundaries between finance, technology, and gaming industries under US law.
Original article: Wired — US Government Investigates Polymarket for Potential Insider Trading