# Polymarket Under Fire: US Regulators Secretly Instigate Three New Insider Trading Probes

> Leaked documents reveal that federal regulators are quietly conducting at least three major investigations into suspected insider trading and market manipulation on the prediction market Polymarket.

**Type:** article · **Category:** Crypto · **Published:** 2026-09-11 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/crypto/polymarket-para-bara-snkata-ameriki-niyamakon-ne-sikreta-taura-para-shuru-ki-insider-trading-ki-tina-nai-janchen-31277 · **Language:** English
**Tags:** Polymarket, Insider Trading, US Regulators, Crypto Prediction Market, CFTC Investigation, Financial Fraud

The United States government has launched at least three previously undisclosed federal investigations targeting suspicious trading patterns on the decentralized prediction platform Polymarket. According to official documents obtained through a Freedom of Information Act request, these civil and criminal inquiries suggest that federal regulators are intensifying their scrutiny of how platform users might be utilizing confidential, non-public information to secure massive payouts on geopolitical developments, corporate announcements, and high-level political decisions. These documents expose how the Commodity Futures Trading Commission (CFTC), the federal watchdog tasked with regulating prediction markets, is deploying its enforcement mechanisms to police these emerging financial tools.

 

## The Crackdown on Political Pardon Bets

The first major investigation was initiated in early May when CFTC Chairman Michael Selig authorized an order enabling the regulator's enforcement division to commence a private investigation into potential insider trading on Polymarket event contracts. This particular probe focused on events tied to presidential pardons granted during the final phase of the Joseph Biden administration. The administrative order equipped investigators with extensive powers, allowing them to issue legally binding subpoenas, take formal testimonies, administer oaths, and compel the production of sensitive corporate and personal documents.

While the regulatory filings do not explicitly identify the targeted accounts or transactions, the enforcement action closely followed a media report detailing a highly suspicious trader. This individual secured more than $300,000 in profits by betting on pardon-related outcomes in the closing days of the Joseph Biden administration. The trader correctly wagered that preemptive presidential pardons would be issued to several prominent MAGA critics, including former representatives Liz Cheney and Adam Kinzinger, alongside senator Adam Schiff. The uncanny accuracy of these high-stakes bets raised immediate concerns regarding potential information leaks from highly confidential political circles.

 

## Investigating Iran Geopolitical Event Contracts

Later in May, Michael Selig approved a second formal investigation order, this time shifting focus to "Iran event contracts" traded on Polymarket. Much like the previous inquiry regarding presidential pardons, this document did not elaborate on specific accounts under investigation. However, its timing was highly suggestive, coming just two weeks after a prominent television news broadcast aired an investigative segment detailing a network of suspicious accounts. This group of traders managed to generate $2.4 million in profits on geopolitical developments concerning Iran, boasting an extraordinary 98 percent win rate.

These developments have sparked a broader debate about the proactive capabilities of federal watchdogs. Joseph Konizeski, a former chief trial attorney within the CFTC's division of enforcement, expressed concern over the agency's methods. Joseph Konizeski stated that "If these investigations are prompted solely by press reports of violations, that is a sign of weakness in this regulatory scheme." Critics suggest that relying on public journalism to trigger enforcement actions highlights a fundamental lag in regulatory oversight, a concern that has intensified during the second Donald Trump era due to perceived regulatory leniency toward prediction markets.

 

## Google Corporate Trends and Parallel Investigations

In July, Michael Selig greenlit a third secret investigation, directing resources toward suspected insider trading on Google-themed Polymarket contracts. Internal communications included in the released records show Paul Hayeck, the acting director of the CFTC's department of enforcement, detailing the probe. Paul Hayeck indicated that investigators are focusing on additional individuals who may have engaged in insider trading linked directly to "Google's 2025 Year in Search Ranking" outcomes.

Paul Hayeck also revealed that the Southern District of New York (SDNY) is conducting a parallel criminal investigation into the matter. He emphasized that the CFTC's civil inquiry remains entirely independent of the ongoing prosecution against Michele Spagnuolo, a former Google software engineer accused of exploiting proprietary data for financial gain. When contacted for statement, representatives for the SDNY declined to comment. Google also declined to comment further, pointing back to its June release stating that Spagnuolo had been terminated from the company. The CFTC did not respond to requests for comment regarding the current status of these open inquiries.

 

## Polymarket's Complex Regulatory Landscape and Mega Valuation

Addressing the ongoing scrutiny, Olivia Chalos, the deputy chief legal officer at Polymarket, stated in an email that "While we do not comment on specific investigations, we regularly refer matters to law enforcement to protect our markets' integrity." She emphasized that the company remains dedicated to preserving market transparency and assisting federal authorities where appropriate.

Polymarket has navigated a turbulent path through the US regulatory landscape. The platform's primary offshore site was banned from accepting US-based traders in 2022 following a prior settlement. However, the company was permitted to introduce a more restricted, US-compliant version in late 2025. Adding to its prominent profile, Polymarket recently concluded a high-profile investment round backed by 1789 Capital, a venture firm led by Donald Trump Jr., valuing the prediction platform at a staggering $21 billion.

 

## Sibling Rivalries and Enforcement Actions Against Politicians

The regulatory clampdown is not restricted to Polymarket. The CFTC has historically looked into potential insider trading on Kalshi, Polymarket's primary domestic competitor. Public reports indicate that Kalshi has proactively referred at least 32 instances of suspicious trading behavior to the federal agency. In one high-profile resolution, the CFTC ordered former US representative George Santos to pay a $35,000 fine for illicit activity surrounding a Kalshi contract regarding whether he would attend Donald Trump's 2026 State of the Union address.

Following the incident, Kalshi issued a lifetime ban to George Santos for violating market manipulation policies, alongside an internal fine exceeding $71,000. George Santos was not subjected to federal criminal charges for this specific incident, though it underscored the regulatory risks associated with political insiders participating in these markets.

 

## Military Intelligence Arrests and the Betting Defense

To date, at least two individuals have been arrested as a result of federal crackdowns on prediction market insider trading. In April, federal authorities apprehended a US special forces officer. Prosecutors allege that the officer utilized highly classified military intelligence to secure over $400,000 in profits by betting on the timing of Venezuelan leader Nicolás Maduro's capture. This was followed by the May arrest of former Google engineer Michele Spagnuolo, who allegedly amassed over $1.2 million through insider knowledge before being detained during travel to New York.

In both of these landmark cases, the CFTC has filed civil market-manipulation charges, while the Department of Justice (DOJ) has pursued criminal wire fraud charges. Both defendants are mounting a novel legal defense, arguing that Polymarket event contracts constitute a form of gambling or sports betting rather than traditional commodity contracts. Consequently, they argue these trades fall completely outside the jurisdiction of federal commodities laws. Whether the DOJ will launch formal criminal inquiries into the Iran geopolitical or presidential pardon trades remains to be seen, though a former CFTC staffer indicated that parallel criminal investigations are highly likely given the high-stakes national security and political implications.

## What this means for you
The US government's crackdown on Polymarket will directly impact everyday prediction market participants and crypto investors by fundamentally altering the regulatory landscape of digital betting.

- **For Prediction Traders:** Increased enforcement against insider trading reduces the risk of average users being manipulated by insiders with non-public info. This ensures a fairer playing field for honest retail participants.
- **Regulatory Classification:** The outcome of these investigations will clarify whether event contracts are treated as gambling or regulated commodities. This decision will dictate future taxation, KYC rules, and platform accessibility globally.
- **Global Precedent:** Aggressive action by US authorities like the CFTC will likely prompt other nations, including India, to tighten surveillance on unregulated betting and forecasting platforms operating in their jurisdictions.

## Why this happened
These secret investigations were launched after highly abnormal, highly profitable trading patterns appeared on prediction platforms, suggesting leaks of classified geopolitical and corporate information.

- **Highly Suspicious Win Rates:** A network of accounts achieving a 98 percent win rate on Iranian military developments and another trader netting $300,000 on highly confidential presidential pardons triggered immediate alarm.
- **Misuse of Confidential Intelligence:** Suspicions arose that a US special forces officer and a Google engineer used non-public, classified military intelligence and corporate proprietary information to place guaranteed winning bets.
- **Media Pressure and Exposure:** Public exposure of these trading loops by investigative journalists and television programs forced the CFTC to initiate formal probes to preserve market integrity and counter criticism of regulatory laxity.

## Questions & Answers

### 1. Why is the US government investigating trading on Polymarket?
The CFTC is investigating potential insider trading involving contracts linked to presidential pardons by Joseph Biden, Iranian geopolitical events, and Google search trends.

### 2. Have there been any arrests related to Polymarket insider trading?
Yes, two individuals have been arrested: a US special forces officer who allegedly used classified military data, and Michele Spagnuolo, a former Google engineer accused of using insider corporate data.

### 3. What defense are the arrested individuals presenting in court?
Both defendants argue that prediction market trades are legally a form of sports betting or gambling, meaning they do not fall under federal commodities regulations.

### 4. Is Polymarket connected to any prominent political figures?
Polymarket recently closed a major funding round led by 1789 Capital, a venture capital firm run by Donald Trump Jr., which valued the company at $21 billion.

### 5. Has Polymarket's rival Kalshi faced similar regulatory issues?
Yes, Kalshi has been investigated in the past. It has referred 32 suspicious cases to regulators and famously banned former Representative George Santos for life for market manipulation.

---
_TrendKia — Har trend, sabse pehle.. Machine-readable view; canonical HTML at the URL above._