Potential Insider Trading Concerns In Prediction Markets – The Polymarket Maduro Bet Case

Recent events in the rapidly expanding U.S. prediction market sector — especially on decentralized platforms such as Polymarket and Kalshi — have drawn significant scrutiny from regulators, lawmakers, and the media.

Specifically, in early January 2026, an anonymous user on Polymarket, a cryptocurrency-based prediction market platform, placed a $32,537 wager that former Venezuelan President Nicolás Maduro would be “out by January 31, 2026.” The bet yielded the anonymous user a profit of over $436,000. This recent high-profile incident on Polymarket has drawn significant attention from regulators, legal experts, and the media, highlighting emerging risks in this rapidly growing sector.

The bet was made shortly before President Trump publicly announced Maduro's capture by United States' forces in a military operation. The same account also placed smaller related bets on potential U.S. military actions in Venezuela, including predictions that the United States would invade Venezuela, and that the War Powers Act would be invoked. The account was reported to be relatively new, being created only a month prior in December 2025, and focused their wages exclusively on Venezuela-related outcomes. The Maduro trade underscored several red flags suggesting the use of inside information in the U.S. prediction market, which the business community should be mindful of.

Regulatory Landscape

Clients engaging with prediction markets should be aware of the material increase in legal, regulatory, and enforcement risks, particularly around potential insider trading. For example, prediction markets, which are regulated by the Commodity Futures Trading Commission (“CFTC”) operate in a largely unregulated environment, and when bad actors make wagers based upon sensitive inside information, loss of their investment is inevitably high.

Experts have suggested that wagers such as the “Maduro Wager” or other events involving or related to war could potentially violate provisions of the Commodity Exchange Act (“CEA”). Specifically, the CEA, which regulates futures and options trading, prohibits registered entities from listing or clearing event contracts (prediction market-style derivatives) that involve, relate to, or reference terrorism, assassination, war, gaming, or activity unlawful under federal or state law — deeming them contrary to the public interest.

In particular, restrictions on gambling-related events explicitly bar contracts tied to war (e.g., military conflicts or invasions), terrorism, or assassination, which are viewed as lacking legitimate economic purpose and posing risks to national security or public perception.

For platforms like Polymarket — which secured CFTC approval in late 2025 for intermediated U.S. operations, but remains under evolving supervision — this means wagers on war or similar violent matters could violate these provisions if offered on regulated platforms, raising expert concerns over potential enforcement or bans on such gambling-like contracts.

In response to the suspicious Maduro Wager, Rep. Ritchie Torres (D‑NY) has introduced the Public Integrity in Financial Prediction Markets Act of 2026, which would:

• Prohibit federal officials, political appointees, and employees from trading on government‑related outcomes when in possession of material nonpublic information;
   
• Extend STOCK Act–style obligations into the prediction market space; and
   
• Apply directly to platforms operating across state lines, including Polymarket.
  This legislation follows growing political consensus that prediction markets pose unique corruption risks when government insiders can place real‑money bets on policy actions, military operations, sanctions, arrests, and geopolitical events.

Implications for Businesses

Regardless of such efforts to prevent insider knowledge affecting the integrity of the market, businesses should monitor the use of Polymarket and other similar platforms to ensure compliance with relevant U.S. laws. Specifically, businesses should be aware of the risks associated with participation in prediction markets, including:

• Potential exposure to counterparties with material non-public information.
   
• Heightened scrutiny from regulators and lawmakers.
   
• Challenges in ensuring market integrity in decentralized or lightly regulated venues.
  Clients and users of these platforms should carefully evaluate any involvement in prediction markets, particularly those tied to geopolitical, national security, or government-related events. Firms and individuals should consider implementing internal controls to prevent the misuse of confidential information in these or analogous platforms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.