Polymarket investigated dozens of midterm bets and referred cases to CFTC

Polymarket investigated dozens of bets tied to the Nov. 3 midterm elections for potential insider trading or market manipulation, and at least two investigations were referred to the Commodity Futures Trading Commission. NPR reported that the referrals were described by a person familiar with the inquiries who was not authorized to speak publicly.

The company’s 16-person intelligence and investigations team is using a new election-surveillance system to police activity before the vote, according to Shana Bautista, Polymarket’s head of global intelligence and investigations. Bautista, a former FBI official and cryptocurrency analyst who joined in June, said the team receives hundreds of alerts each day.

The system assembles gigabytes of information on each user from social media, Federal Election Commission records, cryptocurrency companies, banking partners, statistical models and other public sources. It flags accounts after they reach an internally set threshold of warning signs. Bautista said the team was applying threat vectors known from traditional financial markets to prediction markets, where familiar tactics are being used through a new channel.

Bautista oversees information collected from Polymarket’s U.S.-regulated platform and Polymarket International. The U.S. platform requires real identities, while the larger international service permits anonymous cryptocurrency trading and is essentially unregulated. Bautista said cryptocurrency transactions are rarely wholly anonymous and warned that traders using information they have a duty to protect should not bet on it.

Polymarket US had already told the CFTC in a July comment letter that its registered designated contract market uses real-time and next-day surveillance, third-party specialists, National Futures Association regulatory services, and formal investigation and disciplinary procedures. The company said its rules bar trading on stolen confidential information, illegal tips, and events a trader has sufficient authority or influence to affect, as well as spoofing, wash trading, front-running and fictitious transactions.

The scrutiny comes as election contracts have expanded quickly. As covered earlier this month, trading on the congressional midterms had already exceeded the total recorded across the full 2024 cycle. In May, campaign staffers had made thousands of dollars using insider polling information to bet on their own candidates through Polymarket and PredictIt.

Other platforms have been building comparable controls. Kalshi announced an election-surveillance system in May that also uses FEC data and said in July it had blocked dozens of campaign staffers from election trading, although at least one staffer had bypassed the blocks. In April, Kalshi disclosed three investigations involving candidates betting on their own races, imposing five-year suspensions and fines in two settled cases while issuing a larger penalty against a noncooperative Virginia trader.

Rajiv Sethi, an economics professor at Barnard College who has studied prediction markets for decades, said election markets are especially exposed to manipulation and insider trading. He said such markets could be self-fulfilling when perceptions of a candidate’s momentum or a faltering campaign influence the electoral outcome itself.

The industry also faces legal challenges from states and opposition from lawmakers who argue that election betting poses risks to the democratic process. The CFTC has done little to police the rapidly expanding sector over the past two years, leaving much of the monitoring work to the companies themselves.