Polymarket insider trading exposed: Wallet profits $630,000 hours in advance, U.S. lawmakers seek legislation to regulate

The prediction market is experiencing rapid growth, but regulatory gaps are also being exposed. According to on-chain data, three suspected insider wallets placed bets on Polymarket hours before Venezuelan President Maduro’s arrest, profiting over $630,000 in total. This incident has attracted attention from U.S. politics, with Congressman Torres planning to propose legislation to prohibit federal officials from using non-public information for prediction market trading.

The “Perfect Case” of Insider Trading

Profit data of the three wallets

According to monitoring by on-chain analysis platform Lookonchain, these three wallets exhibit clear signs of insider trading:

• Wallets created days in advance and specifically funded for Venezuela-related events
• Placed bets hours before the official announcement of Maduro’s arrest
• Only bet on Venezuela and Maduro-related events, with no other investment activities
• Profit multiples far exceeding the average level of ordinary prediction market participants

Suspicious Aspects of Insider Trading

The behavior patterns of these wallets show obvious information asymmetry:

• Wallet 0x31a5 achieved $409,900 in returns from a $34,000 investment, indicating high certainty about the event outcome
• The three wallets placed bets simultaneously hours before the official announcement, demonstrating strong time coordination
• The sole purpose of these wallets was to bet on Venezuela-related events, indicating a clear motive

Regulatory Response

Core content of the Torres Bill

U.S. Congressman Rick Torres plans to introduce legislation in 2026 aimed at preventing federal officials and employees from using non-public government information to trade on prediction markets. This indicates that U.S. policymakers have recognized prediction markets as a potential new channel for insider trading.

Compared to traditional financial markets, regulation of prediction markets indeed has significant gaps. While Kalshi and Polymarket both claim rules prohibit insider trading, there is a lack of effective enforcement mechanisms in practice.

Rapid growth of prediction markets and regulatory lag

According to the latest data, prediction markets reached a record trading volume of $18.8 billion in December 2025. Kalshi and Opinion Labs each contributed $6.7 billion, while Polymarket contributed $5.3 billion. This exponential growth has attracted many institutional and retail participants, but the pace of regulatory framework development is lagging behind.

Industry forecasts suggest that the annual trading volume of prediction markets could reach $40 billion in 2026 and potentially surpass $1 trillion within ten years. However, without addressing regulatory issues, this growth could face policy risks.

Future Regulatory Trends for Prediction Markets

Possible policy directions

Based on current events and U.S. political reactions, regulation of prediction markets may include:

• Establishing bans on trading by federal officials and government employees
• Requiring prediction market platforms to implement stricter identity verification and trading monitoring mechanisms
• Tracing the sources of large transactions
• Coordinating with financial regulatory agencies (such as the SEC) to clarify the regulatory jurisdiction of prediction markets

Impact on Market Participants

From a personal perspective, while such incidents may put short-term pressure on the development of prediction markets, in the long run, compliant regulation can actually promote industry healthy growth. Strict regulatory frameworks will raise entry barriers but also enhance market credibility.

For ordinary participants, it’s important to recognize that prediction markets, while offering new investment opportunities, also carry risks of information asymmetry. Unlike traditional financial markets, the pricing in prediction markets is often influenced by participants’ information gaps, which makes insider trading particularly easy to exploit here.

Summary

Insider trading issues in prediction markets are no longer just theoretical discussions but real risks. The $630,000 profit, while not huge in financial markets, exposes significant regulatory loopholes that deserve attention. The legislative plans of Congressman Torres indicate that tightening regulation of prediction markets is an inevitable trend.

For industry participants, key points are: 1) prediction markets are evolving from niche tools to mainstream financial platforms, but regulatory frameworks are still incomplete; 2) the risk of insider trading is more easily exploited on these platforms; 3) future regulatory policies could significantly impact market structure and participation methods. The future development of prediction markets depends on balancing rapid growth with compliant management.