US Regulators Use AI to Crack Down on Insider Trading in Prediction Markets

The past year has seen prediction markets, particularly Polymarket, accused of enabling a surge in fraudulent trading activity. Traders reportedly profited from suspiciously timed bets on major geopolitical events, including the raid on Venezuela and the Iran War. The lack of regulation on Polymarket’s crypto-based platform, which operates offshore, raised questions about whether US authorities would intervene.

Now, the Commodity Futures Trading Commission (CFTC), the agency responsible for overseeing prediction markets, is making it clear: it is actively monitoring and pursuing violations. The CFTC is particularly focused on US-based traders who bypass domestic restrictions by accessing offshore markets, including Polymarket, through virtual private networks (VPNs).

Michael Selig, chairman of the CFTC, emphasized the agency’s commitment to enforcement in a recent interview with WIRED. Speaking from the CFTC’s headquarters in Washington, DC, Selig stated,

“We're going to find them, and we're going to bring actions.”

CFTC Expands Workforce and AI Tools to Combat Market Manipulation

The CFTC, currently operating with a lean staff, is actively recruiting to strengthen its enforcement capabilities. In a trend mirroring other AI-driven workplaces, the agency is also adopting automation to manage the increasing volume of suspicious trading data. Selig highlighted the role of AI in analyzing trading patterns and identifying potential manipulation.

“You’ve got so much data,” Selig explained. “When we feed it into AI, we get really great 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.”

The CFTC’s dual approach—expanding its workforce and integrating AI tools—signals a determined effort to regulate and police offshore prediction markets that have previously operated with minimal oversight.