US uses AI to hunt insider trading at Polymarket

For most Last year, it seemed like that Prediction markets A new golden age of fraud has begun. on Polymarketmerchants amassed fortunes from Suspiciously timed bets On geopolitical events such as the raid on Venezuela and the Iran war. It was unclear whether the US government would be interested in going after some of the more obvious bad actors, given that Polymarket’s cryptocurrency-based platform was technically offshore and not regulated or licensed within the country.

However, now, the Commodity Futures Trading Commission, which oversees prediction markets, wants you to know that it is watching closely. The agency is looking for suspicious behavior from traders within the US who have infiltrated foreign markets, including Polymarket’s cryptocurrency platform – banned in the US – using virtual private networks. “We will find them, and we will take action,” the agency’s head, Michael Selig, told WIRED this week, speaking from the CFTC’s headquarters in a Washington, D.C., office complex called Patriots Plaza II.

The agency, which is particularly weak right now, is working to increase staffing, Selig says. Like many other AI-powered workplaces, the CFTC is also leaning toward automation to handle its increased workload, including tools that analyze trading patterns and identify potential manipulation. “You have a lot of data,” Selig says. “When we feed it into AI, we get really cool information. It can help us understand things, like where we might want to investigate, or when we might need to send a subpoena to a trader.”

In addition to its own internally developed surveillance systems, the agency’s arsenal includes third parties Blockchain tracking tools Such as Chainalogy for cryptocurrency platforms, and market abuse detection software including Nasdaq Smarts for centralized markets. (Except for Nasdaq Smarts, the agency did not specify which AI tools it uses and declined to share more specific examples.)

Prominent prediction market companies have recently begun touting all the work they do to catch dishonest bettors. The US-based Calci Exchange, PolyMarket’s main competitor, has eagerly announced that it will do so. hanging And punish customers It has been flagged for insider trading And market manipulation.

In April, after significant backlash over suspected insider trading, Polymarket announced its own partnership with Chainalysis. It was part of a broader campaign to stamp out market manipulation. While the company’s CEO, Shane Coplan, It may happen In the past, I’ve wondered why insider trading could be good for prediction markets. Polymarket changed its approach this spring, updating its market safety rules and announcing a partnership with Palantir for its US sports markets (the Chaina Analysis deal focuses on the offshore platform). The company did not respond to WIRED’s request for comment on this story.

According to Chainalogy spokesperson Maddie Kenny, the company analyzes the same data for both clients. “The value that Chainalogy adds to our clients, including Polymarket and the CFTC, is organizing the data and enriching it with the attributes and insights we have accumulated over years in this space,” she says. This sure sounds like a good deal for Chainalogy!

The CFTC’s assertions that it is going after insiders come at a moment of intense scrutiny of prediction markets. In March, Connecticut State Sen. Chris Murphy He said WIRED said it was suspected that White House staff were involved in insider trading on war-related contracts. At the beginning of April, seven members of Congress he asked CFTC to investigate foreign markets that offer war-themed event contracts. In a letter, the lawmakers said the committee has the authority and responsibility to limit insider trading, especially regarding “morally obscene” trades related to military action. Selig recently He said Congress reported that the company was pursuing “hundreds, if not thousands” of insider trading tips.