Who can stop insider trading on prediction markets?

This episode of Make Me Smart explores the growing controversy around insider trading in prediction markets, particularly in the context of high-stakes geopolitical events like military operations in Venezuela and Iran. Reporter Megan McCarty Carino details how massive, suspiciously timed bets—some yielding over $400,000—have raised alarms about the use of classified information, with actual arrests made in Israel involving military insiders. The episode unpacks the legal gray area: while prediction markets are regulated as commodity futures by the CFTC, insider trading laws only apply to commodities since 2010, following the Dodd-Frank Act. The core tension lies in whether insider trading on these platforms—where informed bets could improve market accuracy—should be banned for fairness and national security reasons, or embraced as a mechanism for aggregating valuable information. Platforms like Calci and Polymarket are taking steps to curb abuse, including third-party monitoring and banning users with confidential information, but offshore, anonymous operations remain a loophole. Lawmakers are also stepping in, pushing for restrictions on government officials and war-related contracts.