Polymarket Has Investigated 'Dozens' of Midterm Election Bets: Report

According to a person familiar with the probes cited by NPR, at least two of the investigations into midterm election bets by Polymarket have been forwarded to the Commodity Futures Trading Commission.

Shana Bautista, the firm's new head of global intelligence and investigations, informed NPR that Polymarket has examined "dozens" of wagers placed on its midterm election markets for potential manipulation and insider trading.

Bautista, who joined Polymarket in June and previously served as an FBI official and crypto analyst, stated that her team of 16 is actively monitoring election betting using a newly implemented surveillance system leading up to the November 3 vote.

"If you have information that you have a duty to protect, don't trade on it," she asserted, adding that such actions violate both the platform's terms of use and the law. She concluded by stating, "It's explicitly against our terms of use on both platforms, but also is against the law. If you decide that you are smarter and can do it, we will find you."

The surveillance system employed by her team gathers data from various sources, including social media, Federal Election Commission filings, banking partners, crypto companies, and statistical models, flagging Bautista when a user triggers sufficient internal red flags. She mentioned that "We're getting hundreds of alerts a day," though she declined to disclose the precise criteria due to security concerns.

Bautista's team oversees both Polymarket International, where users can trade anonymously using cryptocurrency, and Polymarket's U.S.-regulated exchange, which mandates user identity verification. Despite this, Bautista noted that crypto transactions are seldom entirely anonymous, stating, "There's never been a case that we work where we haven't been able to identify, potentially, who these people are."

Rajiv Sethi, an economics professor at Barnard College, pointed out that election markets are particularly susceptible to issues because they "have the possibility of being a self-fulfilling prophecy," meaning public perception of a candidate's momentum can actually sway the outcome.

In May, insider trading garnered attention when campaign staffers allegedly told NPR they had placed "thousands" of bets on their own candidates based on tips concerning unreleased poll data. One individual commented on this, saying, "Because you have all this information and knowledge that isn't publicly available yet, it's almost foolish not to bet on it before it's made public." Jeff Le Riche, a former CFTC trial lawyer, informed the publication that such trades "could potentially be a violation" of the law.

Regarding enforcement, NPR reported that the CFTC has historically done minimal work policing prediction markets, largely delegating this responsibility to the companies themselves. However, in September, CFTC staff issued a warning that contracts concerning whether a specific person speaks certain words or attends an event, referred to as "mention markets," should be considered highly vulnerable to manipulation. This advisory followed a fine imposed on a teleprompter operator who traded based on speeches he had already read.

In April, Polymarket joined forces with the blockchain analytics firm Chainalysis to implement market surveillance tools. This partnership occurred shortly after an active-duty U.S. Army soldier was charged with utilizing classified information about the raid that captured Nicolás Maduro to place wagers on Polymarket. The soldier, who has pleaded not guilty, reportedly wagered over $33,000 and subsequently won close to $410,000; Polymarket stated it detected this activity and alerted authorities prior to the soldier's arrest.

Meanwhile, Kalshi, which is Polymarket's primary competitor, initiated its own FEC-based system in May to prevent campaign personnel from placing bets on elections. In June, Kalshi augmented this by adding employment disclosures for high-risk markets and establishing a risk-scoring framework, claiming that this effort led to over 150 investigations that year and referrals of more than 20 cases to law enforcement. Nevertheless, one campaign staffer disclosed to NPR that they had discovered a method to bypass Kalshi's restrictions.