Prediction markets like PolyMarkets and Kalashi are rapidly becoming an economic and political force, earning billions of dollars in valuations and receiving support from key Trump administration officials.
But the backlash is spreading across the platforms — as well as in Washington and state capitals — amid allegations of insider trading following White House military action in Venezuela and Iran and fueling several midterm election campaigns.
Fault lines are already emerging over who is in charge of regulation, with many frontline Democrats pushing to rein in the companies. In March, California Governor Gavin Newsom signed an executive order barring appointed state officials from using insider information to place bets on prediction markets. Regulation is under discussion in other states, including Arizona and Massachusetts.
Meanwhile, the president’s son Donald Trump Jr. is an advisor to both Kalshi and Polymarket. And both companies are spending big to win over the country’s political class, along with Polymarket Opening a pop-up bar on K Streetamong other efforts. Both platforms did not immediately respond to requests for comment.
Here are some recent incidents that have raised concerns among state and federal lawmakers.
Capture of Nicolas Maduro
Federal authorities on Thursday announced the arrest of a U.S. Army Special Forces soldier accused of using confidential information to place more than a dozen bets on Polymarket related to the capture of Venezuelan strongman Nicolas Maduro in January.
Gannon Ken Van Dyke, a 38-year-old soldier who helped plan the Caracas operation, spent about $33,000 on bets, earning more than $400,000 in payouts. Justice Department said. Authorities accused him of unlawfully using confidential government information for personal gain, among other alleged crimes.
In operation US forces captured Maduro in his bedroom overnight before taking off Longtime Venezuelan leader in New York City To face narco-terrorism charges.
Government officials argue that Van Dyke’s alleged actions took advantage of that mission.
“Our men and women in uniform are trusted with classified information to accomplish their missions as safely and effectively as possible, and are prohibited from using this highly sensitive information for personal financial gain.” Acting Attorney General Todd Blanch said in a statement Thursday. “Widespread access to prediction markets is a relatively new phenomenon, but federal laws protecting national security information fully apply.”
US-Iran ceasefire
Hours before President Donald Trump announced a ceasefire with Iran in early April, at least 50 newly created Polymarket accounts spent thousands betting on the temporary peace, according to a report by the Associated Press.
An account created just 12 minutes before Trump’s Truth Social announcement made $48,500 on a $31,908 bet that there would be a ceasefire. Another made a profit of $200,000, the AP reported.
Polymarket also took heat after the initial US attacks on Iran, with “six suspected insiders” betting on them just before the attacks occurred, making more than $1 million, according to blockchain company BubbleMaps.
Meanwhile, Israeli authorities charged two men in February with using classified information to place bets about military operations on Polymarket, According to NPR.
Congress’s bet
On Wednesday, Kalshi announced he was suspending three 2026 Congressional candidates from the platform for betting on their own races. Democrat Matthew Klein of Minnesota, Republican Ezekiel Enriquez of Texas and Virginia Senate candidate Mark Moran were each banned for five years and face fines or penalties ranging from about $500 to more than $6,000.
Klein, who is running to replace outgoing House Assemblywoman Angie Craig in Minnesota’s 2nd District, issued an apology on Twitter.
“It was a mistake, and I’m sorry,” he has written. “My experience, like that of many other Minnesotans, points to the need for clear rules and regulations for these types of markets.”
Enriquez has not appeared to comment publicly on his bet or suspension.
Moran, a former “FBoy Island” contestant who is launching a long-shot bid to challenge Senator Mark Warner (D-Va.) in Virginia, took a different tack, Was writing on X that he wanted to be caught.
“I traded $100 on myself, knowing this would happen (also knowing I would not compete for the democratic nomination) and that it would draw attention to how this company is destroying the youth and that as senator I would go after Kalshi and impose a significant penalty on them – 25% – a sub tax – to pay off our national debt,” he said.
playing with mother nature
Many Polymarket traders made thousands of dollars in profits by accurately predicting the sudden, unusual rise in temperatures at Paris’s Charles de Gaulle Airport on April 15. According to the Wall Street Journal.
The country’s weather service, Météo-France, is now investigating the incident, which may be linked to tampering.
MrBeast editor
in February, Kalshi reported Artem KapturAn editor at MisterBeast, one of the world’s largest influencers and most popular YouTube creators, has filed a complaint with federal authorities for allegedly trading “material, non-public information obtained by reason of his employment” in connection with the celebrity’s YouTube videos.
Kalashi Captur suspended from its platform for two years and imposed a financial penalty of more than $20,000. He was fired in march.
“Beast Industries has no tolerance for this behavior, whether by competitors or our own employees,” MrBeast’s company wroteIn those days.
