Prediction markets such as Polymarket and Kalshi are rapidly evolving into significant economic and political entities, achieving multi-billion dollar valuations and gaining backing from prominent figures within the Trump administration.
However, these platforms are facing growing opposition in Washington and state capitals, with allegations of insider trading surfacing after U.S. military actions in Venezuela and Iran, as well as impacting several midterm election campaigns.
Debates over regulatory authority are beginning to surface, with several leading Democrats advocating for tighter controls on these companies. In March, California Governor Gavin Newsom issued an executive order preventing appointed state officials from using insider information to place bets on prediction markets. Discussions about regulations are ongoing in states like Arizona and Massachusetts.
Donald Trump Jr., the president’s son, serves as an adviser for both Kalshi and Polymarket. Both companies are investing heavily to gain favor with the nation’s political elite, with Polymarket launching a pop-up bar on K Street among their efforts.
Here are some recent events that have heightened the concerns of lawmakers at both state and federal levels.
The capture of Nicolás Maduro
On Thursday, federal authorities disclosed the arrest of a U.S. Army special forces soldier, Gannon Ken Van Dyke, for allegedly using confidential information to place over a dozen bets on Polymarket related to the January capture of Venezuelan leader Nicolás Maduro.
Van Dyke, aged 38, was involved in planning the Caracas operation and reportedly spent around $33,000 on these bets, earning over $400,000 in winnings, as stated by the Justice Department. He faces charges of unlawfully leveraging confidential government information for personal profit, among other allegations.
The operation involved U.S. forces capturing Maduro in his bedroom and transporting him to New York City to face charges of narco-terrorism.
Authorities argue that Van Dyke exploited this mission for personal gain.
Acting Attorney General Todd Blanche emphasized, “Our men and women in uniform are entrusted with classified information to carry out their missions safely and effectively, and they are prohibited from using this sensitive information for financial gain. Widespread access to prediction markets is relatively new, but federal laws safeguarding national security information fully apply.”
Polymarket did not immediately respond to a request for comment.
U.S.-Iran ceasefire
In the hours leading up to President Donald Trump’s announcement of a ceasefire with Iran in early April, at least 50 newly established Polymarket accounts wagered thousands on the occurrence of temporary peace, as reported by the Associated Press.
One account, created just 12 minutes before Trump’s announcement on Truth Social, profited $48,500 from a $31,908 bet on the ceasefire. Another account earned a $200,000 profit, according to the AP.
Polymarket also faced criticism following the initial U.S. strikes on Iran, as “six suspected insiders” bet on the attacks just before they happened, earning over $1 million, according to Blockchain company Bubblemaps.
In a related incident, Israeli authorities charged two individuals in February for using classified information to place bets on Polymarket regarding military operations, as reported by NPR.
Congressional bets
Kalshi revealed on Wednesday that it had suspended three candidates in the 2026 congressional races for betting on their own campaigns. Minnesota Democrat Matthew Klein, Texas Republican Ezekiel Enriquez, and Virginia Senate candidate Mark Moran were each handed five-year bans and fined amounts ranging from around $500 to over $6,000.
Klein, running to succeed House lawmaker Angie Craig in Minnesota’s 2nd District, apologized on X, saying, “This was a mistake, and I apologize. My experience, like many other Minnesotans, highlights the need for clearer rules and regulations for these markets.”
Enriquez has not publicly commented on his suspension or wager.
Moran, a former contestant on “FBoy Island” who is challenging Sen. Mark Warner (D-Va.) in Virginia, took a different approach, stating on X that he intended to be caught. “I traded $100 on myself, knowing this would happen (also knowing that I wouldn’t 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,” he said.
Elisabeth Diana, Kalshi’s head of communications, emphasized that exposing the bets placed by Klein, Enriquez, and Moran highlights the company’s commitment to maintaining integrity in its regulatory efforts. “As a federally regulated exchange, we prohibit insider trading and market manipulation and have meaningful surveillance and enforcement programs in place,” she said.
Playing with Mother Nature
Several traders on Polymarket made substantial profits by predicting unexpected temperature spikes at Paris’ Charles De Gaulle airport on April 15, as reported by the Wall Street Journal. Météo-France, the national weather service, is investigating the incident, suspecting potential tampering.
MrBeast’s editor
In February, Kalshi reported Artem Kaptur, an editor for MrBeast, a leading influencer and popular YouTube creator, to federal authorities. Kaptur was accused of trading on material, non-public information obtained through his employment with the celebrity’s YouTube channel.
Kalshi suspended Kaptur from its platform for two years and fined him more than $20,000. He was fired in March.
MrBeast’s company stated, “Beast Industries has no tolerance for this behavior, whether by contestants or our own employees.”
