Unveiling the Hidden Hand: US Government’s Secret Probes into Polymarket Trades
In a significant revelation, documents obtained by WIRED through a Freedom of Information Act request expose at least three previously unreported US government investigations into trading activities on the popular prediction market, Polymarket. These probes, spearheaded by the Commodity Futures Trading Commission (CFTC), cast a spotlight on the opaque world of event contracts and raise critical questions about market integrity and regulatory oversight.
The CFTC’s Expanding Reach
The CFTC, the federal agency tasked with regulating prediction markets, has quietly escalated its scrutiny. Voting records from the commission offer a rare glimpse into the government’s investigative approach, detailing orders that grant broad powers to its enforcement division, including the authority to compel testimony, issue subpoenas, and demand document production.
Biden Pardons: A Political Wager Under Suspicion
One of the earliest investigations, approved by CFTC chairman Michael Selig in early May, targeted potential insider trading on Polymarket event contracts linked to pardons issued by former President Joseph Biden. While specific trades remain undisclosed, this order closely followed an NPR report highlighting a suspicious Polymarket trader who amassed over $300,000 from pardon-related markets in the final days of the Biden administration. This trader accurately predicted preemptive pardons for prominent MAGA critics like Liz Cheney, Adam Kinzinger, and Adam Schiff, raising red flags.
Iran Event Contracts: Geopolitical Gambles and Mysterious Wins
Later in May, Selig greenlit a second investigation, this time focusing on “Iran event contracts” on Polymarket. Again, details were sparse, but the timing was notable, coming just two weeks after a 60 Minutes exposé on a network of suspicious Polymarket accounts that collectively netted $2.4 million from Iran-related trades, boasting an astonishing 98 percent win rate. Such consistent, high-stakes accuracy fuels suspicions of illicit information usage.
Google’s ‘Year in Search’: Tech Secrets on the Market
July saw the approval of a third investigation, zeroing in on suspected insider trading related to Google-themed Polymarket event contracts. An internal email exchange, part of the WIRED documents, revealed that Paul Hayeck, acting director of the CFTC’s enforcement department, confirmed the probe would target “additional individuals who may have engaged in insider trading related to Google’s 2025 Year in Search Ranking.” Hayeck also noted a “parallel investigation” by the Southern District of New York, explicitly stating the CFTC’s inquiry would be separate from the ongoing case against Google engineer Michele Spagnuolo, who faces charges of insider trading. Both SDNY and Google declined to comment, with Google referencing a prior statement that Spagnuolo was no longer with the company. The CFTC remained silent on the status of its investigations.
Regulatory Scrutiny and Industry Challenges
The surge in investigations, often seemingly triggered by media reports, has drawn criticism. Joseph Konizeski, a former chief trial attorney in the CFTC’s enforcement division, remarked, “If these investigations are being prompted solely by press reports of potential violations of the Commodities Exchange Act, that’s a significant sign of weakness in this regulatory scheme.” This sentiment underscores concerns about the agency’s perceived leniency towards the prediction market industry, particularly during the “second Trump era.”
Polymarket’s Path and Rivals
Polymarket itself has navigated a complex regulatory landscape. After its flagship platform was banned in the US in 2022, it was permitted to launch a US-regulated version with a narrower market scope in late 2025. The company recently achieved a staggering $21 billion valuation following a fundraising round led by Donald Trump Jr.’s venture capital firm, 1789 Capital. The CFTC has also investigated Polymarket’s rival, Kalshi, which has reportedly referred at least 32 cases to the agency. Notably, former US representative George Santos was fined $35,000 by the CFTC and banned for life by Kalshi for market manipulation related to a contract on his attendance at Trump’s 2026 State of the Union address.
Arrests, Legal Battles, and the Future of Prediction Markets
The intensified scrutiny has already led to arrests. In April, federal authorities apprehended a US special forces officer accused of using classified information to profit over $400,000 from event contracts related to the capture of former Venezuelan leader Nicolás Maduro. A month later, Michele Spagnuolo was arrested while traveling to New York, facing allegations of making over $1.2 million from insider trades. In both instances, the CFTC filed civil charges, while the Department of Justice pursued criminal fraud charges. Both defendants are challenging these charges, arguing that Polymarket trades constitute a form of betting, not subject to commodities law. The legal outcomes of these cases will undoubtedly shape the future of prediction markets and their regulation in the United States.
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