Insider Trading Fears Grow as Prediction Markets Flag Hundreds of Suspected Users

The world of prediction markets is currently experiencing a massive surge, but this success comes with significant downsides. Platforms where users bet on the outcome of real-world events are increasingly struggling with manipulation. While operators try to weed out bad actors themselves, federal regulators in the U.S. appear completely overwhelmed. Severe staffing cuts at the Commodity Futures Trading Commission (CFTC) have led to many reports of suspicious trading activity going unaddressed.

Kalshi and Polymarket are at the center of current developments. These providers allow bets on political decisions, sporting events, or even economic indicators. This is precisely where the problem lies: anyone with exclusive knowledge can manipulate the market to their advantage. While platforms have implemented their own monitoring systems, the enforcement of legal consequences rests with state agencies that are currently barely functional.

Numbers and facts

In 2026 so far, Kalshi has flagged over 50 traders, while Polymarket has referred more than 90 account holders to authorities in the U.S. and overseas. In the three-month period ending in June alone, Kalshi referred 32 possible insider trading cases to the CFTC. Despite this flood of evidence, the agency has brought civil charges against only three individuals to date. A primary reason for this shortfall is the thin staffing: the CFTC's enforcement division consists of only about 100 people, primarily responsible for the multi-trillion dollar commodities market.

The situation is particularly precarious in Chicago. There, the CFTC's enforcement division shrank from roughly 20 trial attorneys to effectively zero after the last remaining trial lawyer resigned in February. By comparison, in fiscal 2024, the agency recorded 58 enforcement actions and a record $17.1 billion in monetary relief. In the year following the administration change, the number of actions fell to eleven, with less than $1 billion obtained. Senator Elizabeth Warren criticized in July that staffing had fallen 25% since January 2025.

Background

A prominent example of the issue is the case of George Santos. The disgraced former congressman reportedly placed bets on Kalshi regarding whether he would attend the State of the Union address on February 24. While he publicly claimed he would be present, he reportedly bet money that he would not appear. He later cited flight trouble as the reason for his absence. The CFTC charged him with market manipulation because he misled other traders about his plans. He made approximately $17,000 in profit from this wager. Another case involves a Polymarket user who earned nearly $410,000 by betting on the capture of former Venezuelan leader Nicolas Maduro.

"Prediction markets are likely to attract fraud and insider trading." - Tarek Mansour, CEO of Kalshi

The CFTC is also hesitant to broadly prohibit risky contracts. Instead, contracts are reviewed one at a time. This faces resistance from sports organizations like the NFL, which demands bans on bets regarding player trades or starting lineups. In Europe, the stance is much more restrictive. Countries like France, Germany, and the Netherlands are already largely blocking access to major operators like Polymarket.

Why it matters for German players

For German players, the situation is clear but also restrictive. Prediction markets like Polymarket or Kalshi do not hold a license from the Gemeinsame Glücksspielbehörde der Länder (GGL) and are therefore not legally accessible in Germany. The Interstate Treaty on Gambling 2021 (GlüStV 2021) sets extremely narrow limits for event betting. While sports bets on game outcomes are allowed, bets on political events or social incidents fall under the prohibition of unlicensed gambling.

German users should be aware that accounts at such providers can be frozen at any time, with no legal claim for payout enforceable in Germany. Furthermore, these platforms lack strict German player protection measures such as the €1,000 monthly deposit limit or connection to the LUGAS central file. Anyone wishing to play safely and legally must strictly look at the official GGL whitelist, which only includes providers adhering to the €1 per spin rule for slots and rigorous identity checks.

What it means for GGL-licensed casinos

Legal providers in Germany face the challenge that global prediction markets remain attractive to some players despite bans, often through VPN services or crypto payments. The GGL monitors such developments closely to curb the black market. For licensed casinos, this means the focus must remain on maximum transparency and integrity to differentiate themselves from unregulated and manipulation-prone international markets. The Santos case demonstrates how easily "inside information" can be abused on unregulated platforms, which theoretically justifies the strict German rules for betting markets.