Share 
A new _Fortune_ opinion piece argues that prediction markets such as Polymarket and Kalshi can be vulnerable to insider trading and influence from powerful participants, raising broader questions about market integrity in the U.S.
Authors Steve H. Hanke and Roger Koppl say prediction markets are most useful when traders cannot affect the event being priced. They argue the model becomes less reliable when insiders, officials, or politically connected investors may be able to trade on information unavailable to the public or help shape the outcome itself.
ESMA warning adds to integrity concerns
The article points to a biannual risk report from the European Securities and Markets Authority, which said prediction markets are “rife with insider trading.” It also cites examples involving U.S. officials and event contracts tied to policy decisions.
One example in the piece is a Polymarket contract related to whether Federal Reserve interest-rate policy would remain unchanged in September. The authors argue that if Fed officials themselves traded on such a market, the resulting price would no longer serve as a clean signal of public expectations.
The piece also references a 2021 _Fortune_ report that said two Fed officials engaged in extensive stock trading in 2020 while the central bank was spending trillions of dollars to stabilize financial markets and support the economy.
Polymarket, Kalshi, and the U.S. regulatory backdrop
Hanke and Koppl also focus on who is backing the sector. According to the article, prediction-market promoters include President Trump, Donald Trump Jr., and Michael S. Selig, chairman of the Commodity Futures Trading Commission, the federal agency described as overseeing prediction markets.
The article says Donald Trump Jr.’s firm, 1789 Capital, bought shares in Polymarket after Donald J. Trump’s 2024 election win. It adds that Polymarket was valued at under $1 billion when 1789 Capital first invested and later at $21 billion.
The piece further says Polymarket had previously been barred from taking monetary wagers from U.S. residents before later receiving a U.S. operating license from a federal regulator. Kalshi is mentioned as another market the authors believe can be affected by the same “Big Player” dynamic.
What it means for players
For people following prediction markets, the main takeaway is not a change in rules, but a warning about how these markets should be interpreted. The _Fortune_ article argues that prices on political or policy-related contracts may not always reflect neutral crowd wisdom if major participants have better information or direct influence over outcomes.
Open questions remain, including Polymarket’s current U.S. regulatory status, what incidents ESMA relied on in its warning, and how regulators may address insider-trading concerns in event-contract markets.
—
Source: As reported by Steve H. Hanke and Roger Koppl.
