A mysterious trader won roughly $400,000 on the ouster of Venezuelan strongman Nicolás Maduro just hours before U.S. forces took him into custody — a well-timed bet that has drawn attention to the rapid rise of prediction markets and whether there are sufficient guardrails around them.
The trade unfolded on an online platform that allows users to bet on the outcome of political elections, sporting events and other real-world developments. Such outlets have expanded rapidly over the past year, even though consumer protections and enforcement against insider trading remains looser than in traditional financial markets, according to legal experts and former regulators.
Once a niche space, prediction markets have been buoyed by the growth of sports gambling, the Trump administration’s embrace of cryptocurrency and the increasing overlap between crypto trading and event-based betting. In October, President Donald Trump’s social media start-up Truth Social said it planned to join the fray, announcing it planned to start its own prediction market.
Supporters say the markets can aggregate information efficiently and offer new ways for individuals to profit from their insights. But the Maduro wager has sharpened concerns about whether the platforms are creating lucrative opportunities for people with access to confidential or sensitive information — from government contractors to military personnel — and whether institutions accustomed to strict rules around classified material are prepared for a world in which geopolitical secrets can be monetized with a few clicks.
“Whenever you see a super-lucky trade like that, you’ve got to ask, were they lucky, or did they know something?” said James Angel, a finance professor at Georgetown University, describing the “Maduro whale” episode as a potential security leak if the trader had advance knowledge of a secret U.S. mission.
An anonymous trader on Polymarket’s offshore prediction market late last month began placing small bets on a U.S. military intervention in Venezuela. The first wager came Dec. 27, when the user made a $96 bet on contracts that would pay out if U.S. forces were in Venezuela by Jan. 31, according to archived Polymarket data. Over the following week, the trader steadily increased the stakes, concentrating on a narrow set of contracts tied to Maduro’s fate — including bets that would pay off if he were no longer in power by the end of the month, a scenario most users still viewed as remote.
The last wager was placed at 9:58 p.m. Eastern time on Friday, just before a U.S. operation deposed the Venezuelan president. At that point, the relevant contracts were trading for about 8 cents on the dollar, suggesting the market projected a slim chance that Maduro would shortly be out of power. When news of the U.S. operation to capture him broke several hours later, the contracts surged in value. By the end, the trader had turned roughly $34,000 in wagers — more than half placed hours before the operation — into more than $400,000 in profit.
Angel said anyone trading on information about a classified operation should face appropriate discipline, regardless of whether their conduct ultimately violates insider-trading restrictions laws. The military, working with the Justice Department, is best suited to investigate such possible leaks because of its criminal authority, he said.
But it is far from clear that such trading would be easy to prosecute — or that the government would go ahead with an investigation. The wagers were placed on Polymarket’s offshore exchange, which says it bars users who are residents of, or located in, the United States. While those restrictions can be circumvented with relative ease, legal experts say that if the trader was a foreign national placing bets from abroad, U.S. authorities would have little jurisdiction.
Polymarket didn’t respond to requests for comment.
The Defense Department says its ethics requirements prohibit personnel from using “nonpublic information to further any private interest.”
Prediction markets broke into the mainstream as billions of dollars were spent trading futures contracts on the outcome of the 2024 election. Though interest in the sector appeared to fall off afterward, rapid growth in recent months by Polymarket, Kalshi and a newcomer, Opinion, have the industry taking in about $3 billion in volume of bets each week — a previously inconceivable amount.
(A spokesperson for Kalshi said the firm prohibits insider trading of any kind, including banning government employees betting on government activity.)
Blockchains, the technology that underlies most of the sites, contain public transaction data for each bet, but include no names or demographic information — making it nearly impossible to unmask market participants. The prediction market sector saw about 43 million bets in November from about 600,000 accounts (although one person can have multiple accounts), according to data from Dune, a crypto data firm.
It’s a remarkable turn since the Biden era, when federal regulators generally resisted the emergence of such markets, reasoning that they weren’t in the public interest, and sought to separate the worlds of gambling and financial trading.
Despite a federal judge’s 2024 ruling that cleared the way for election betting, top Biden administration officials remained skeptical of the practice. By the end of President Joe Biden’s term, Polymarket had become the subject of parallel criminal and civil investigations, and the company’s chief executive’s home was searched by the FBI, according to reports by the New York Times and other outlets.
States, which have historically regulated gambling, may pose the main obstacle to faster growth now. At least nine, including Massachusetts, Nevada and New Jersey, have taken action to try to block these markets, reasoning that they should be subject to state oversight. The issue is likely to be ultimately decided by the Supreme Court, according to Andrew Kim, a partner at the law firm Goodwin Procter.
“Financial speculation has generally been regulated by the federal government, while gambling has been regulated by the states,” he said. “The question is, what is this? Is it a financial asset or is it gambling?”
Tara Copp contributed to this report.
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