Polymarket probes election bets

Polymarket has opened investigations into dozens of election-related trades, Shana Bautista told reporters. The company’s head of global intelligence and investigations said her team is actively monitoring activity ahead of the November 3 midterms.

Bautista joined the firm in June. She manages data from both the U.S. regulated version of the platform and its international counterpart, which allows anonymous cryptocurrency trading. She noted that despite the anonymity, her team has rarely failed to identify traders involved in specific cases.

Her 16-person unit relies on a new surveillance system that aggregates gigabytes of data per user. The system pulls information from social media, Federal Election Commission records, banking partners, and statistical models. When a user triggers internally defined red flags, Bautista receives an immediate alert on her phone. She said the team currently processes hundreds of these alerts daily.

The investigations focus on insider trading and market manipulation. Bautista stated that if a trader holds information they have a duty to protect, they should not trade on it. She said such behavior violates the platform's terms of use and existing law.

"If you decide that you are smarter and can do it, we will find you," Bautista said.

According to a person familiar with the probes, at least two of the Polymarket investigations have been referred to the U.S. Commodity Futures Trading Commission. The person spoke on condition of anonymity because they were not authorized to speak publicly about the specific cases.

This scrutiny arrives as prediction markets for politics grow in popularity. Competitor Kalshi launched a similar surveillance system in May. Kalshi blocks campaign staffers listed by the FEC from betting on elections. In July, Kalshi said it had blocked dozens of such staffers, though one anonymous staffer told NPR they eventually found a way to trade.

Earlier this year, Kalshi fined several candidates who bet on their own races. In May, reports indicated that campaign workers had made thousands of dollars using insider polling data on platforms like Polymarket and PredictIt.

Rajiv Sethi, an economics professor at Barnard College at Columbia University, warned that these markets are uniquely vulnerable to manipulation. He explained that election outcomes can be influenced by public perception, creating a risk of self-fulfilling prophecies if a candidate appears to be losing momentum.

Bautista said her team studies past cases to improve detection. She described a scenario where a trader uses multiple accounts with similar device IDs to place short bursts of trades. When the team identifies such a pattern, they feed the findings back into their system to create new detection rules.

The CFTC, the federal regulator for these markets, has largely left enforcement to the companies themselves. Polymarket continues to refine its tools as trading volume increases.