Predicting a suspicious insider-trading scheme worth $200 million over the past six months—who is reaping huge profits?

Insiders have found a surefire new way, with an article by ChandlerZ predicting that the market size for prediction markets is rapidly expanding. TRM Labs data shows that the predicted monthly trading volume for 2026 has already surpassed $21 billion. For Polymarket’s geopolitics category alone, the cumulative trading volume as of mid-June this year already exceeds $5 billion, including over $2 billion in trading volume for Iran-related contracts. But growing in step with the market’s scale is the phenomenon of profiting by betting with non-public information.

On July 21, Bloomberg Businessweek published a long-form data investigation analyzing roughly 34k suspicious transactions flagged by Polysights, an on-chain monitoring platform, between August 2025 and June 2026. The core finding is that in the first half of 2026, the total value of transactions marked as suspicious on Polymarket was about $200 million. The analysis also shows that profits from trades marked as potential insider trading on the Polymarket platform are highly concentrated: the top 1% of wallets account for more than half of the funds. Moreover, 57% of these wallets were created less than 24 hours before the trade. Recently, one account used a wallet created just two hours before its first trade to place a bet as low as 6% odds on the market option “Can the U.S.-Iran permanent peace agreement be reached by June 15?” and profited $370k.

What Bloomberg found. Bloomberg could do this analysis because all of Polymarket’s trading runs on the Polygon chain, and all bets, odds, and wallet fund flows are publicly traceable. By contrast, Kalshi, a centralized platform regulated by the CFTC, keeps trading data private. That makes Polymarket the ideal sample for studying insider trading in prediction markets.

The provider of the data, Polysights, is an AI-driven on-chain analytics platform backed by investments from Polymarket, Predict.fun, and Underdog Fantasy. It completed a $1.5 million funding round in June this year. The platform assigns scores across 8 dimensions for each trade, including: bet size, the time gap between when the account was created and when the event occurred, the odds level at the time of entry, concentration of trading volume in a particular market, and profit rate, among others. Trades with a composite score above a threshold are marked as suspicious.

Bloomberg conducted further cross-analysis based on Polysights’ data, revealing several key patterns. Suspicious trades are concentrated in geopolitics and military categories. The markets related to Iranian airstrikes and ceasefires contributed about $45 million in suspicious trading volume, the highest among all categories. Iran-related bets peaked in late February (around the time of the U.S.-Israel joint airstrike on Iran). The contract “When will the U.S. strike Iran?” alone attracted more than $529 million in trading volume.

Profits are highly concentrated in a tiny number of wallets. Among suspicious trades, the top 1% of profit wallets captured more than half of the profits. Of these high-profit wallets, 57% were created within 24 hours before the trade, pointing to a typical “use-and-disappear” pattern: create new wallets, place bets, profit, and then vanish.

The source of funds points to the United States. Among flagged trades, the proportion funded through U.S.-regulated crypto exchanges is as high as 71%. In Iran-related geopolitics markets, this proportion reaches 70%, nearly three times that of unflagged trades. Polymarket is ostensibly prohibited from allowing U.S. users, but users can bypass the restriction via VPNs. Since January 2021, out of Polymarket’s roughly $21B in traceable trading volume, about half comes from wallets funded through U.S.-regulated exchanges.

The report says that some large trades that appear to be from insiders can be easily found by companies and other institutions that track suspicious trades, but their trading methods often involve multiple small bets. They increasingly use coordinated wallet clusters, focusing on markets with smaller trading volume and fund size—where their trades can still be profitable but are less likely to draw attention. For example, 38 associated addresses bet on Trump’s actions involving Iran and Venezuela, with a win rate as high as 98%, and ultimately profited $1.6 million. All the addresses withdrew through the same Coinbase deposit account.

After the Bloomberg report was published, Car, a well-known Polymarket analyst in the community, also wrote a rebuttal, pointing out that Polysights had flagged more than 34k wallets as “possible insider traders,” including ordinary users who bet on Argentina winning the World Cup. Car tracked a wallet highlighted in the Bloomberg coverage and found that its actual profit was about several hundred thousand dollars, lower than the $1.5 million claimed by Bloomberg. He argued that the wallet’s trading history (placing large bets for long periods in election and sports markets) fits the profile of an experienced high-frequency trader more than an insider trader.

This controversy reveals the core difficulty in detecting insider trading in prediction markets: in a market that rewards informational advantage pricing, how do you distinguish between doing good research and knowing the answer in advance? Polysights’ algorithm cannot answer that question—it can only flag statistical outliers, and the judgment still rests with humans.

Dozens of connected wallets profited $1.6 million through bets involving the U.S. military. Bloomberg reported that some large trades that appear to be from insiders can be easily found by companies and other institutions that track suspicious trades, but their trading methods often involve multiple small bets. They increasingly use coordinated wallet clusters, focusing on markets with smaller trading volume and fund size—where their trades can still be profitable but are less likely to draw attention. For example, 38 associated addresses bet on Trump’s actions involving Iran and Venezuela, with a win rate as high as 98%, and ultimately profited $1.6 million. All the addresses withdrew through the same Coinbase deposit account.

From 2026 to date, the prediction market space has already produced the first two criminal insider-trading charges in the history of the United States. The first involved U.S. military special forces betting on a Venezuela operation. On April 23, the U.S. Department of Justice and the CFTC filed criminal charges against Chief Warrant Officer Gannon Ken Van Dyke of the Army Special Forces. Van Dyke took part in planning and executing Operation Absolute Resolve, the “absolute determination” action that led to the arrest of former Venezuelan president Nicolás Maduro on January 3. He used confidential information obtained during the operation to invest about $34k on Polymarket, ultimately profiting about $409,000. Afterward, Van Dyke demanded Polymarket delete his account and replace the registered email for crypto exchanges to hide his identity. He was charged with multiple counts, including illegally using confidential government information for profit, stealing non-public government information, commodity fraud, and wire fraud.

The second case involved a leak by an Israeli reservist officer betting on an Iran operation. Israeli authorities arrested two people: Omer Ziv, a 30-year-old iGaming industry worker, and an Israeli Air Force reservist major whose name was not disclosed for national security reasons. The indictment shows that after the major learned that Operation Rising Lion—an operation targeting Iranian nuclear facilities—was about to be carried out, he informed Omer Ziv of the intelligence via WhatsApp. Omer Ziv then built a position on Polymarket, ultimately profiting about $128.4k, and split the gains with the officer in the form of cryptocurrency. The two were detained starting in late January, and in March, Omer Ziv’s identity was made public.

A common feature of both cases is that the people involved had access to confidential information about an upcoming military operation, and prediction markets provided a direct channel to monetize that information.

A paper published this March by Columbia Law School professor Joshua Mitts and Haifa University professor Moran Ofir, titled “From Iran to Taylor Swift: Informed Trading in Prediction Markets,” provides a broader quantitative analysis. The research identified more than 210k suspicious transactions, bringing “informed traders” about $143 million in abnormal profits since 2024. The study used a five-dimensional composite scoring system, including cross-market bet sizes, single-trader bet sizes, profit rates, pre-event time windows, and directional concentration. The win rate of the flagged traders was 69.9%, deviating from random probability by more than 60 standard deviations.

Before the U.S. and Israel launched airstrikes against Iran on February 28, six newly created wallets on Polymarket collectively earned about $1.2 million, including one wallet that completed its first trade 71 minutes before the news was public, earning about $553k in profit.

Regulatory and industry reactions to insider trading in prediction markets are advancing on multiple fronts at the same time. At the federal law-enforcement level, the CFTC has launched a broad investigation into Polymarket. In January, Representative Ritchie Torres introduced a Public Integrity Financial Prediction Markets Act to ban anyone who has access to non-public material information from trading in prediction markets; the bill has been co-signed by more than 40 Democratic lawmakers. In late April, the Senate unanimously passed a resolution banning senators and congressional staff from participating in prediction markets. In May, James Comer, chairman of the House Oversight Committee, launched a congressional investigation specifically targeting insider trading in prediction markets.

At the level of financial institutions, Goldman updated its internal trading policy in July, banning employees from participating in political and financial prediction market contracts, while keeping exemptions only for sports and entertainment contracts.

At the level of state governments, pressure is also targeting Kalshi. A Washington state judge issued a preliminary injunction against Kalshi, ruling that it constitutes illegal gambling. An Arizona prosecutor also filed criminal charges against Kalshi, accusing it of operating gambling services without a license.

At the platform level, Polymarket updated its market integrity rules in March, clearly prohibiting trading using confidential information obtained by violating fiduciary duties, acting on prompts from insiders, and betting on events where you have the ability to influence outcomes. The platform said it has submitted leads on nearly 100 wallets to law-enforcement agencies, and some of the leads directly contributed to the prosecution of the two criminal cases mentioned above.

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