Effective combat against insider trading in prediction markets is only possible with mandatory user verification—KYC. This view was expressed by Messari analyst Austin Weiler in a comment to Cointelegraph.
According to the expert, KYC platforms can restrict trading access for certain categories of individuals, including government officials. While this does not eliminate the possibility of information being passed to third parties, such barriers significantly enhance enforcement standards.
The Decentralization Dilemma
In the case of non-custodial platforms without verification, controlling insiders is “virtually impossible,” Weiler believes. The lack of connection between wallets and real identities makes it difficult to determine whether a trader had access to non-public information.
“Blockchain transparency does not solve the attribution problem. Without identity verification, it is extremely challenging to confidently link a wallet to a specific official or insider,” the analyst emphasized.
Weiler added that monitoring for abnormal activity or artificially slowing down trades is ineffective, as these measures can be easily circumvented.
Different Platform Approaches
Identification requirements among key players in the prediction market vary:
- Kalshi: fully regulated by the CFTC and requires personal data and documents from users.
- Polymarket: applies KYC for U.S. residents. There is no mandatory verification in international markets, although the platform does not officially comment on this.
- Opinion: a decentralized project associated with YZi Labs, does not disclose information about identity verification requirements.
Political Insider Trading
The discussion around regulating prediction markets has intensified following a series of large bets on political events.
One incident that raised eyebrows involved a trader turning $30,000 into over $400,000 just hours before U.S. troops captured former Venezuelan President Nicolás Maduro. At the time of writing, the user's page is unavailable.
The relevance of this issue is underscored by recent events in Portugal. The local regulator demanded to block access to Polymarket, declaring the platform's activities illegal.
Authorities were drawn to anomalies before the presidential elections. Two hours before the official results were announced, the order volume exceeded €5 million. Portuguese law prohibits betting on political events.
Despite the expiration of a 48-hour ultimatum, the site continued operations. It is now set to be blocked through providers. The regulator warned that it would not be able to assist users in retrieving funds from the unlicensed platform.
Earlier this year, U.S. legislator Ritchie Torres proposed an initiative to ban officials from trading on prediction markets when they have insider information.
NEW — RITCHIE TORRES (D-N.Y.) will introduce a bill on this.
— Jake Sherman (@JakeSherman) January 3, 2026
Bill will be called the Public Integrity in Financial Prediction Markets Act of 2026
Description, per a source:
This bill prohibits federal elected officials, political appointees, and Executive Branch employees… https://t.co/eZZ9BmAMgJ
It’s worth noting that analysts from a16z crypto predicted that in 2026, the crypto market will focus on integrating its tools, such as prediction platforms.