Prediction Markets Flag Dozens of Suspected Insider Traders as CFTC Enforcement Lags
Kalshi has flagged over 50 traders in 2026, while Polymarket has flagged over 90. Still, the CFTC has brought action against only three people so far.
Prediction market platforms have begun flagging potential insider traders at a rapid pace. The surge is testing the resources and legal tools of a federal regulator already operating with its smallest staff in at least two decades.
The New York Times reported this week that in the three months ending in June, Kalshi referred 32 possible insider trading cases to the Commodity Futures Trading Commission (CFTC). As many as 20 open investigations currently relate solely to Kalshi’s evidence. At the same time, another dozen prediction market platforms operate in the U.S.
Kalshi has flagged over 50 traders so far in 2026. Polymarket is even further ahead, referring more than 90 account holders to authorities both in the U.S. and overseas.
Despite that raft of potential cases, the CFTC has brought civil charges against just three prediction market traders to date.
CFTC Staffing Cuts Weigh on Enforcement
A reason for the shortfall is that the CFTC is operating with its smallest staff in at least two decades. Extensive cuts by the Trump administration caused much of the decline. That has left an enforcement division of about 100 people, mainly responsible for the much larger multitrillion-dollar commodities market.
The strain appears particularly clearly in Chicago. There, the CFTC’s enforcement division went from roughly 20 trial attorneys to effectively none after its last remaining trial lawyer resigned in February.
Most of the employees left voluntarily and took early retirement offers. The agency logged 58 enforcement actions and a record $17.1 billion in monetary relief in fiscal 2024. In the 12 months following the change in administration, it brought just 11 enforcement actions and obtained less than $1 billion in monetary relief. Less than $10 million came from actions filed by the current administration.
The staffing concerns have also drawn scrutiny from Congress. Sen. Elizabeth Warren asked the Government Accountability Office (GAO) in July to investigate the CFTC’s workforce reductions and whether they have contributed to a decline in enforcement activity. Warren said staffing had fallen 25% since January 2025. At the same time, the agency’s responsibilities could expand through prediction markets and digital assets.
Given reasonable concerns that staffing cuts may have a material impact on the CFTC’s ability to carry out its mandate as required by current law, I request that the GAO thoroughly review the staffing cuts,” Warren wrote.
The leadership ranks also remain thin, with CFTC Chair Michael Selig the only sitting member of a five-person commission. He has repeatedly promised that the agency will pursue people who trade illegally on confidential information.
Former Chicago enforcement attorney David Slovick isn’t convinced. He questioned whether current staffing levels allow the government to properly monitor market participants.
Existing Insider Trading Rules Leave Prediction Market Gaps
The rules create another obstacle even for a fully staffed agency. Regulators largely created the current framework for policing insider trading over decades of dealing with stocks and commodities. The prediction market boom has widened that scope. That has forced regulators to police conduct far beyond the misappropriation of confidential corporate information.
Some conduct also falls outside existing statutes. For example, authorities fined former New York Congressman George Santos $35,000. Santos made $17,000 on Kalshi by wagering on whether he would attend the State of the Union. The CFTC charged him with market manipulation rather than insider trading, alleging he misled other traders about his plans before skipping the event.
Congress has begun paying attention to these gaps. Lawmakers have introduced measures such as the Public Integrity in Financial Prediction Markets Act to bar elected officials, congressional staff, and executive branch employees from trading certain prediction market contracts.
In March, more than 40 lawmakers called on the CFTC and the Office of Government Ethics to warn federal employees about insider trading. They cited cases such as a Polymarket user who made almost $410,000 by betting on the capture of Venezuela’s former leader, Nicolas Maduro.
CFTC Rejects Broad Ban on High-Risk Contracts
The third constraint stems from the CFTC’s decision not to broadly prohibit contracts on events where information about the outcome is concentrated among only a small number of people.
That approach has drawn pressure from state regulators and sports organizations. For example, the NFL has asked the agency to prohibit certain categories, such as bets on trades, starting lineups, and on what a broadcaster might say live on air.
The rules that the CFTC proposed in June reject a broad prohibition and instead favor reviewing contracts one at a time. Prediction market platforms can flag suspected misconduct by the dozen, feeding cases into an enforcement system already struggling to keep pace.
Featured image: G. Edward Johnson via Wikimedia Commons (license)
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