The Commodity Futures Trading Commission is increasingly relying on artificial intelligence-powered surveillance tools and blockchain analytics software to combat insider trading and market manipulation on prediction markets such as Polymarket.
According to comments by CFTC Chair Michael Selig in an interview with WIRED, the agency’s growing focus on predictive markets comes amid mounting political scrutiny over suspicious trading activity tied to geopolitical events and war-related contracts on offshore exchanges. Selig told WIRED that the CFTC is actively monitoring U.S.-based traders who use virtual private networks to access foreign prediction markets that are technically unavailable to Americans.
“We’re going to find them, and we’re going to bring actions,” Selig said in the interview.
The comments underscore how federal regulators are attempting to expand oversight of prediction markets even as much of the trading activity occurs outside traditional U.S. regulatory frameworks. Polymarket, which operates using cryptocurrency infrastructure and is blocked for U.S. users, has faced repeated allegations of insider trading connected to bets on military conflicts and political developments.
Selig indicated that the CFTC’s enforcement strategy increasingly depends on software-driven analysis because of the agency’s limited staffing resources. “You’ve got so much data,” Selig said. “When we feed it into AI, we get really great information. It can help us understand things, like where we might want to investigate, or when we might need to send a subpoena to a trader.”
The WIRED report noted that the CFTC is “especially lean right now” and is using automation to manage growing enforcement demands. The agency’s toolkit includes proprietary surveillance systems as well as commercial software products such as blockchain tracing tools from Chainalysis and market abuse detection software including Nasdaq Smarts.
The increased use of automated surveillance mirrors a broader trend among regulators and trading platforms that are turning to AI-assisted compliance systems to monitor large volumes of trading data for unusual patterns.
Prediction market operators themselves have also moved to strengthen monitoring systems amid criticism over potential manipulation. WIRED previously reported that Kalshi recently said it had suspended users and flagged customers for insider trading and market manipulation.
Related: CFTC Moves To East Reporting Requirements for Prediction Markets
Polymarket likewise announced a partnership with Chainalysis in April after backlash over suspicious trading activity. The company also updated its market integrity rules and entered a separate partnership with Palantir Technologies for U.S.-based sports prediction markets.
The CFTC’s enforcement push comes as lawmakers intensify pressure on the agency to address insider trading concerns surrounding prediction markets tied to military conflicts and foreign policy developments. Sen. Chris Murphy (D-CT) previously suggested White House staffers could be involved in trading on war-related contracts, while several members of Congress have formally asked the CFTC to investigate overseas prediction markets offering military-action contracts.
Selig told WIRED the agency is pursuing “hundreds, if not thousands” of insider trading tips.
The chairman also emphasized that the agency’s investigations extend beyond federally regulated exchanges. “We’re surveilling the markets on a global basis,” Selig said.
According to the article, the CFTC is willing to assert extraterritorial jurisdiction in certain cases involving offshore platforms if trading activity affects U.S. markets or participants. Selig pointed to authority granted under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, particularly involving foreign swap activities with U.S. implications.
So far, federal prosecutors have publicly charged only one individual with insider trading connected to prediction markets: a U.S. Army special forces soldier accused of trading on contracts tied to the capture of former Venezuelan leader Nicolas Maduro. Polymarket later said it had flagged the suspicious trades to authorities.
Still, Selig made clear that the agency views the Maduro-related case as an opening move rather than an isolated enforcement action. The CFTC, he said, intends to pursue wrongdoing “no matter ‘how large or how small.’”
