US prediction markets are sending a growing number of suspected insider-trading cases to regulators, raising questions over whether the Commodity Futures Trading Commission has enough staff and enforcement capacity to keep pace with the rapidly expanding sector.
Kalshi has flagged more than 50 traders for potentially suspicious activity during 2026, while Polymarket has referred more than 90 account holders to authorities in the US and other jurisdictions. Despite the volume of referrals, the CFTC has so far brought civil action against only three prediction-market traders.
The pressure intensified during the three months to the end of June, when Kalshi reportedly referred 32 possible insider-trading cases to the regulator. Around 20 active CFTC investigations are understood to relate specifically to evidence supplied by Kalshi, while several other prediction-market operators are also active in the US.
CFTC Resources Stretched as Market Expands
The widening enforcement workload comes as the CFTC operates with its smallest workforce in at least two decades. Its enforcement division has been reduced to roughly 100 employees, who are also responsible for policing the much broader US derivatives and commodities markets.
The staffing reduction has been particularly visible in Chicago, where the agency’s enforcement office went from approximately 20 trial attorneys to effectively having none following the departure of its final trial lawyer in February.
Overall enforcement activity has also declined. The CFTC recorded 58 enforcement actions and $17.1 billion in monetary relief during fiscal 2024. During the 12 months following the change in administration, it brought 11 enforcement cases and secured less than $1 billion in monetary relief, according to Gambling Insider.
The reductions have attracted congressional scrutiny. Senator Elizabeth Warren asked the Government Accountability Office in July to examine whether workforce cuts were damaging the regulator’s ability to carry out its responsibilities. Warren said CFTC staffing had fallen by approximately 25% since January 2025, even as the regulator’s remit increasingly includes prediction markets and digital assets.
Insider Trading Rules Tested by New Types of Contracts
The CFTC maintains that insider trading is prohibited on prediction markets when traders misuse material non-public information obtained in breach of a duty of trust or confidentiality. Enforcement Director David Miller identified prediction-market insider trading as one of the agency’s major priorities earlier this year.
The regulator has already used existing Commodity Exchange Act provisions against suspicious event-contract activity. In February, it detailed two Kalshi cases involving improper trading. One concerned a political candidate trading on an event connected to his own candidacy, while another involved a YouTube editor who was suspected of trading with advance knowledge of unpublished video content. Kalshi imposed financial penalties and suspensions in both cases.
A more serious case followed in April, when the CFTC charged active-duty US Army service member Gannon Ken Van Dyke with allegedly using classified information concerning a US operation to capture former Venezuelan president Nicolás Maduro. The regulator alleged Van Dyke purchased more than 436,000 “Yes” shares on Polymarket and generated more than $404,000 in profits. It was the CFTC’s first insider-trading case involving event contracts.
Other situations do not fit as neatly into traditional insider-trading law. Former Congressman George Santos was fined $35,000 after making approximately $17,000 on Kalshi contracts linked to whether he would attend the State of the Union. Authorities pursued the case as alleged market manipulation rather than insider trading.
Platforms Strengthen Their Own Surveillance
With exchanges acting as the first line of defence, prediction-market operators are increasingly investing in monitoring technology.
Kalshi announced a multi-year agreement with Nasdaq in August to integrate its market-surveillance system. The technology is designed to detect suspicious activity, including manipulation and potential insider trading, while improving the exchange’s ability to provide trading data to the CFTC. Kalshi has also expanded its surveillance team and referred suspicious activity directly to regulators.
The broader regulatory debate remains unresolved. Sports organisations have urged the CFTC to restrict contracts whose outcomes can be influenced or known in advance by a small number of people, including markets involving player trades, starting line-ups and certain live-broadcast events. Rather than imposing a blanket prohibition, the regulator has favoured assessing potentially problematic contracts individually.
That approach leaves prediction platforms responsible for detecting large volumes of questionable trading while the CFTC determines which cases justify federal action. As event-contract activity continues to grow, the widening gap between platform referrals and completed enforcement cases is likely to remain a central challenge for US prediction-market oversight.