Polymarket Polices Insider Trading as Lucrative Military Bets Raise Suspicions

Polymarket users have a 52% rate of winning long-shot wagers on military actions, a nonprofit research group recently found. That’s better than the likelihood of predicting a coin flip correctly, which, fun fact, is 51% because thumbs have a slightly biased wobble favoring the side the coin starts on. 

The Anti-Corruption Data Collective found that defense-related long-shot wagers, meaning bets of more than $2,500 on odds at or below 35%, won more than half of the time. Those are oddly good odds considering that, more generally on the platform, a paper found the top 1% of traders have historically raked in three-quarters of its profits.

As scrutiny of war-related trades intensifies, Polymarket said on Thursday it’ll introduce new features to monitor its platform. 

On-Chain Detective Work

Prediction markets let users bet on everything from how many EVs Tesla will deliver to whether the Rapture will happen this year. (Who’s going to pay that one out?) They’ve existed in a legal gray area since their inception. Amid a discussion about what counts as gambling that’s more tense than an election-year Thanksgiving dinner, Polymarket’s ramping up its efforts to police insider trading. Its crackdown will look different than it does for traditional financial companies, though:

• Polymarket is teaming up with blockchain analytics firm Chainalysis to monitor platform activity and help ensure users aren’t acting on insider intel. The partnership makes sense, since Polymarket is built on a blockchain. All trades on Polymarket’s blockchain are publicly recorded, but users are anonymous, a feature that historically has attracted bad actors across the crypto world. 
• Matching suspicious trades to potential culprits typically requires collaborating with law enforcement, which Polymarket has been doing. People keeping an eye on Polymarket’s blockchain were quick to notice an account that made more than $400,000 winning wagers related to the capture of Venezuela’s ex-leader Nicolás Maduro. Polymarket handed the user’s data over to law enforcement, and prosecutors charged Gannon Van Dyke. The Army Special Forces sergeant pleaded not guilty on Tuesday.

Playing Nice: Polymarket’s the world’s largest prediction market, and as it gains users, not all of them have good intentions. The blockchain-based platform was booted from the US by regulators before making a comeback late last year. Now, it’s trying to buddy up to them, while still defending the legitimacy of its core business. It’s also facing increasing competition, including Wall Street titans like Robinhood and, possibly soon, the on-chain heavyhitter Hyperliquid.