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On September 11, 2026, WIRED published CFTC voting records obtained through a FOIA request. They revealed that the agency overseeing prediction markets had quietly authorized at least three Polymarket insider trading investigations, covering Biden pardon contracts, Iran war contracts, and Google-themed contracts. None had been reported publicly before 1.

For anyone who trades these markets, that is not just a regulatory story. It describes the counter-party sitting across from you in certain contracts. When a trader with nonpublic information takes the other side, your probability estimate is not wrong, it is simply priced against better information. The practical question is whether you can see that flow building before it reprices your position, and what to do when you spot it.

Key Takeaway: Insider trading on prediction markets follows a recognisable pattern in the data: fresh wallets funded shortly before a trade, size that ignores the order book, one-way conviction without hedging, and trade timestamps compressed into the hours before an event resolves. You will rarely trade against it profitably. You can usually avoid being the exit liquidity for it.

What the FOIA Documents Actually Show

All three investigations were approved by CFTC chairman Michael Selig, and each one followed a press report rather than an internal surveillance alert 1:

1. Biden pardons, early May. The order gave enforcement authority to take testimony, obtain subpoenas, and compel documents on suspected insider trading in pardon contracts. It followed an NPR report on a trader who netted more than $300,000 by correctly betting on preemptive pardons for Liz Cheney, Adam Kinzinger, and Adam Schiff.
2. Iran event contracts, end of May. Authorized two weeks after a 60 Minutes report on a network of suspicious Polymarket accounts that made $2.4 million on Iran-related trades with a 98 percent win rate.
3. Google contracts, July. This one targets “additional individuals who may have engaged in insider trading related to Google’s 2025 Year in Search Ranking.” The Southern District of New York is running a parallel investigation.

“If these investigations are being prompted solely by press reports of potential violations of the Commodities Exchange Act, that’s a significant sign of weakness in this regulatory scheme.”

Joseph Konizeski, former chief trial attorney in the CFTC’s division of enforcement 1

Detection is reactive: journalists and market participants find these patterns before the regulator does, so the flow stays live longer than it would in a heavily surveilled market like equities.

The Two Arrests That Changed the Stakes

Prediction market insider trading is no longer theoretical. Two men have been charged criminally, and the cases give us the clearest picture available of what informed flow looks like from the inside.

In April 2026, federal authorities arrested Gannon Ken Van Dyke, an active-duty Army Special Forces master sergeant stationed at Fort Bragg, for allegedly using classified nonpublic information about the capture of Venezuelan president Nicolás Maduro to profit more than $400,000 on Polymarket. He is the first person charged in the United States with insider trading on a prediction market, indicted on five counts including multiple Commodity Exchange Act violations 2.

The sequence in the indictment is a textbook pattern. He opened his Polymarket account on December 26, moved roughly $35,000 from his bank to a crypto exchange, and placed his first Venezuela trade the next day. Between 8 and 10 p.m. ET on January 2, he placed three transactions on a “Maduro out by January 31, 2026” contract, totalling more than 250,000 shares. The raid happened overnight on January 3.

In May 2026, a Google engineer named Michele Spagnuolo was arrested while travelling to New York. Trading under the alias “AlphaRaccoon,” he allegedly made more than $1.2 million, including a correct wager that the singer D4vd would be Google’s most-searched person of 2025 3.

Kalshi, meanwhile, has referred at least 32 cases to the CFTC and handed former US representative George Santos a $35,000 fine plus a lifetime ban over a contract about his own attendance at the State of the Union. He was not criminally charged.

6 Signals of Polymarket Insider Trading

None of these signals is proof on its own. Two or more in the same market within a short window means you should assume you are trading against better information.

1. A price that moves before the headline

The Iran contracts repriced ahead of the news that explained the move, which is why the 60 Minutes report focused on timing rather than direction. Watch for a contract that gains five to fifteen cents in one session on an otherwise quiet news day.

2. Fresh wallets funded shortly before the trade

Van Dyke’s account was days old when he placed his first Venezuela trade. Wallets that fund, trade one market directionally, then go dormant are the most consistent fingerprint in every case reported so far.

3. Size that ignores the order book

Retail accounts respect depth; informed accounts often do not, because the expected profit dwarfs the slippage. Our breakdown of what it costs to move a price found that moving a quote by one cent costs between $3 and $272,873 depending on the market. An account that happily eats that cost is telling you something.

4. One-way conviction with no hedge

Speculators hedge. Van Dyke allegedly placed 13 Venezuela-related transactions, seven of them on a single contract in the same direction, then sold everything the day it resolved. No partial exits, no opposite-side insurance.

5. Win rates that are statistically absurd

A 98 percent win rate across a network of accounts on $2.4 million of Iran trades is not skill. It is the sample size telling you the information was known in advance.

6. Timing compression before resolution

The closer to resolution a large position is opened, the less uncertainty remains and the more valuable the information. Three transactions in a two-hour window hours before an overnight raid is the clearest possible version of this signal.

How to Trade Around Informed Flow

You do not beat informed money by fading it. You survive it by refusing to be its exit liquidity.

• Do not blindly fade a violent repricing. If a contract moves twelve cents without news, the move is more likely information than error.
• Do not blindly follow it either. By the time the volume prints, the price already reflects most of it. Late followers inherit the risk with a fraction of the edge.
• Size down and use limit orders. In thin markets the spread widens after a repricing, and market orders get punished.
• Wait for the second confirmation. Either a news item that explains the move, or a repricing that holds for several sessions. Unconfirmed spikes fade roughly as often as they run.
• Watch for the same wallet across related markets. A cluster of connected accounts is what turned several individual trades into federal cases.

If you want to see this flow yourself, both major venues publish full trade histories, and opening a Kalshi account gives you access to the same public tape these investigations were built from.

The Twist That Could Change Everything

Both defendants argue the same thing: that Polymarket contracts are gambling, not swaps, and therefore fall outside US commodities law entirely. Spagnuolo’s team filed a motion to dismiss in August 2026, claiming the US had no jurisdiction over a non-US citizen wagering in Zurich on a Panama-administered platform 3.

The CFTC is fighting back, stressing in an amicus brief in Van Dyke’s criminal case that the contracts are indeed swaps. As regulation expert Todd Phillips put it, “Spagnuolo is basically making the same argument as the states that are suing prediction markets. This is the issue that will likely go up to the Supreme Court.”

If the gambling argument wins, insider trading enforcement on these platforms rests on much weaker ground. That is the same fault line running through the state-level crackdown on prediction markets, and it is the single legal question most likely to reshape how these markets trade in 2027.

Your Checklist Before the Next Trade

1. Check the tape: fresh wallets, concentrated one-directional positions, and someone paying slippage your own sizing would never tolerate.
2. Check the clock: has the market moved ahead of a known event without an explanatory headline?
3. Check the calendar: is resolution less than 72 hours away, where information asymmetry is largest?
4. Report suspicious activity. Kalshi accepts tips through its market integrity process, and the CFTC takes complaints via its advisory and complaint channels.

The honest summary is uncomfortable. Insider trading is present in these markets, it has already produced federal arrests, and the regulator largely learns about it from reporters. You cannot eliminate that risk, but you can price it and avoid being the last buyer of a repriced contract.

EdgeOutcome may earn a commission if you sign up for a trading platform through links on this page. This does not affect our editorial assessments. Nothing here is financial advice; prediction markets carry the risk of losing your entire stake.