Noticing an interesting situation on Polymarket that well illustrates how insider information can turn into quick profit. Six accounts on the prediction platform earned about $1.2 million by correctly predicting the U.S. strike on Iran on February 28. This is not just a coincidence — blockchain analysts from Bubblemaps discovered that all wallets were created in February, funded within 24 hours before the attack, and had only one transaction: buying "Yes" shares on this specific market.

The details look very suspicious. One account bought over 560,000 shares at 10.8 cents, and when the market closed at $1, it made a $560,000 profit. Another made a six-figure sum on 150,000 shares. Literally hours before the news of explosions in Tehran, these wallets already knew the outcome. This is a classic example of how insider information provides an absolute advantage in prediction markets.

Interestingly, regulators are already paying attention to this. The CFTC warned last year about potential violations in prediction markets, and competitor Kalshi has already begun actively penalizing users for suspicious activity. This week, they suspended the MrBeast trader who was trading knowing the show results. Calculating: Kalshi investigated about 200 cases and has over a dozen active investigations. This means that insider trading on these platforms is not isolated but a systemic problem.

And here’s the funniest part — recently, Polymarket traders started betting on a market dedicated to insider trading itself. When ZachXBT announced he would publish an investigation into a certain crypto platform, a contract appeared on Polymarket immediately about which company would be named. And several wallets clearly knew the answer — they actively bet on Axiom even before the official announcement. This is already bordering on absurdity.

The main problem is that prediction markets have serious potential as tools for trading based on insider information. Unlike traditional financial markets, it’s much harder to track who is behind an account and where they know the outcome from. Polymarket shares trading data on the blockchain, but this doesn’t always help identify the true owners of wallets.

Regulators seem to be beginning to understand the seriousness of the situation. The CFTC officially warned that insider trading on event contracts could violate U.S. law. But the question remains: how to control what happens on global platforms when insider information can come from anywhere in the world? This will be an interesting challenge for regulators in the coming years.