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Lawmakers Request Investigations into Prediction Market Trades Preceding Geopolitical Events

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Bipartisan Lawmakers Call for Investigation into Prediction Market Trades

A bipartisan group of U.S. lawmakers is calling for regulatory investigations into the prediction market platform Polymarket following a report of well-timed bets placed on a geopolitical event. The calls center on concerns that the trades may have involved access to nonpublic information.

Reported Trades and Research Findings

On Wednesday, The Associated Press reported that at least 50 newly created accounts on Polymarket placed substantial bets predicting a U.S.-Iran ceasefire in the hours and minutes before former President Donald Trump announced a ceasefire on social media. According to the report, these accounts had placed no other bets on the platform.

This report follows two previous instances of large, anonymous trades on Polymarket preceding major events:

  • In January, an anonymous user reportedly made a $400,000 profit by betting on the capture of Venezuelan leader Nicolas Maduro hours before it occurred.
  • Prior to the start of the Iran war, another account reportedly made approximately $550,000 from trades betting on a U.S. strike against Iran and the removal of Ayatollah Ali Khamenei.

Last month, researchers at Harvard University released a paper estimating that $143 million in profits on Polymarket may have been made by individuals with potential insider information on various events.

Lawmaker Actions and Statements

In response to the AP report, lawmakers from both major political parties have taken action and issued statements.

Democratic Lawmakers

  • Representative Ritchie Torres (D-N.Y.) sent a letter to the Commodity Futures Trading Commission (CFTC) on Thursday demanding a review and investigation of the trades. Torres stated the pattern "raises serious concerns that certain market participants may have had access to material nonpublic information."
  • Senator Richard Blumenthal (D-Conn.) sent a letter to Polymarket demanding the company explain why it allows trades on war and violence and what efforts it is making to prevent insider trading. Blumenthal wrote that the platform has "become an illicit market to sell and exploit national security secrets."

Republican Lawmakers

  • Representative Blake Moore (R-Utah) expressed concern about the potential for adversaries to use such platforms, stating, "We don't want to imagine a world where America's adversaries use prediction markets to anticipate our next move."

At least two bipartisan bills are pending in Congress that would ban certain types of bets on these platforms.

Platform Status and Industry Context

Polymarket and its U.S.-based competitor, Kalshi, are prediction market platforms that allow users to place bets on the outcome of future events.

  • Polymarket's Status: Polymarket was banned from operating in the United States in 2022. The company is currently attempting to reenter the U.S. market by acquiring a CFTC-licensed exchange and clearinghouse. It operates a separate, crypto-based platform offshore, which accounts for most of its activity and exists outside of U.S. jurisdiction.
  • Kalshi's Position: Kalshi is a regulated U.S. prediction market that aims to become a dominant player in the sector. It has announced partnerships with sports teams and news organizations, including an agreement with The Associated Press to sell U.S. elections data.
  • Notable Connection: Donald Trump Jr. is publicly identified as an investor in Polymarket and a paid strategic adviser to Kalshi.

Polymarket did not immediately reply to a request for comment from The Associated Press.