Federal prosecutors in Manhattan are scrutinizing well-timed bets on prediction markets that have lately grabbed headlines — and are examining whether they may have violated insider trading laws, sources told The Post.
Officials at the US Attorney for the Southern District of New York — headed by former Securities and Exchange Commission Chairman Jay Clayton — recently met with reps from Polymarket about lucrative wagers on surprise events like the capture of Nicolás Maduro and missile strikes on Iran, sources close to the situation said.
“The action in the prediction markets, like the action in any markets, is stuff that will be looked at,” a source with knowledge of the matter told The Post.
The person added that both the SEC and the US Attorney’s office have authority to probe concerns about insider trading and market manipulation in “all markets … just because a market is new doesn’t mean it can’t be investigated.”
Officials leading the Southern District’s securities and commodities fraud unit met with representatives of Polymarket to discuss potential violations of existing law in the rapidly expanding sector, the sources said.
Polymarket, headed by CEO Shayne Coplan, didn’t respond to a request for comment.
It couldn’t immediately be learned whether federal prosecutors have also met with rival prediction markets site Kalshi.
But “all of them are being looked at,” said the source with firsthand knowledge of the matter.
The person added that no specific trade has caught the US Attorney’s eye.
“There just a lot out there, too much to ignore,” the source said.
A spokesperson for Kalshi, headed by CEO Tarek Mansour, referred The Post to social media comments by the company’s Head of Enforcement Robert DeNault saying insider trading and market manipulation are violations of Kalshi’s rules.
“Kalshi has been and will continue to collaborate with law enforcement on investigations to ensure the integrity of regulated prediction markets,” he wrote on X
The Southern District’s inquiry, earlier reported on by CNN, marks a regulatory ramp up for an industry that has grown sharply over the past year, with virtually no federal oversight.
No companies have been accused of wrongdoing. Prediction market sites allow wagers on a variety of topics and events including sports and awards shows.
“As a general matter, our Office meets with market participants to discuss market activity and application of the law,” Nicholas Biase, a spokesman for the US Attorney’s office, said in a statement.
“With regard to so-called ‘prediction markets,’ our Office has made clear that various laws — including insider-trading statutes, anti-money-laundering requirements, prohibitions on manipulation, and other antifraud provisions — apply to a broad range of observed activity,” he added.
Last week, Polymarket said it was cracking down on using stolen information and illegal tips, among other steps, while Kalshi announced guardrails to prevent politicos and athletes from betting on outcomes they could influence.
Clayton recently warned at a securities-law conference that criminal cases involving prediction-market activity are likely.
“Calling it a prediction market doesn’t insulate you from fraud,” he said.
Well-timed wagers on the sites have spurred bipartisan legislative efforts to clarify the rules.
Last week, California Gov. Gavin Newsom issued an executive order banning state officials from using insider information in prediction markets. And Arizona recently filed a criminal case against Kalshi, alleging the company operates an illegal gambling business and facilitates election wagering. Kalshi has denied the allegations.
In addition, dozens of civil lawsuits — backed by a bipartisan group of state attorneys general — have been filed against prediction-market operators.
Critics argue that the platforms are largely self-regulated and vulnerable to manipulation. Polymarket’s US-approved platform is not yet fully operational, meaning some of its most controversial markets — such as those tied to Venezuela and Iran — are offered offshore and beyond the reach of US regulation.
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