Prediction Markets Raising Predictable Questions of Regulation, Public Policy

By: John Mikuta

On January 3, 2026, the United States carried out a shocking military strike against Venezuela, resulting in the capture of Venezuelan President Nicolas Maduro.[i]  Maduro was taken from his home in Caracas and flown to New York, where he faces narco-terrorism conspiracy, cocaine importation conspiracy, and weapons possession conspiracy charges.[ii]

While the strike surprised most of the world, a few traders on Polymarket seemingly anticipated that it would occur.  Polymarket, the “world’s largest prediction market,”[iii] is a platform where “people can bet on the outcome of future events” by buying and selling shares in the outcomes.[iv]  Polymarket allows users to trade on sports outcomes, economic data, business actions, pop culture, and—as relevant here—political events such as election outcomes and international conflicts.  Each offering is structured as a binary choice—traders can select “yes” or “no” on whether a particular outcome will occur.  Polymarket is not fully live in the United States.

The day before the strike, at least two Polymarket accounts placed large bets that Maduro would be removed from power.  One user turned a $5,800 stake into a roughly $75,000 payout by predicting that Maduro would be out of office by January 31, 2026.[v]  Another user risked 34,000 and won more than $400,000.[vi]  Both accounts have since become inactive, and at least one individual has been arrested in connection with leaking sensitive information related to Venezuela.[vii]

The suspiciously timed trades have sparked a legislative, regulatory, and public relations backlash against Polymarket.  On the legislative front, Congressman Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026 on January 9.[viii]  The bill would prohibit federal elected officials, political appointees, executive branch employees, and congressional staff from buying, selling, or exchanging prediction market contracts when they have or could reasonably obtain inside information about government policy, action, or outcomes.[ix]  It is unclear whether or when the bill will be brought up for a vote.  As it were, the chance of the bill passing within the current session is just 12% according to another prediction market, PredictIt.[x]

Moreover, Portugal’s Gaming Regulation and Inspection Service recently ordered Polymarket to cease operations in the wake of suspicious trading activity during the country’s presidential election.[xi]  There, the favored candidate entered the election with 60% odds to win on Polymarket, but his probability reached 96% a full hour before the polls closed, indicating that users were likely trading on leaked exit poll data.[xii]

Despite the backlash, Polymarket has taken a more open stance on insider trading.  In a November 2025 interview, Polymarket’s founder, Shayne Coplan, stated that it was “cool” that Polymarket “creates this financial incentive for people to go and divulge the information to the market and the market to change.”[xiii]

The scrutiny on Polymarket in the wake of Maduro’s capture has not been limited to insider trading.  On January 6, 2026, Polymarket announced that its “market” on whether the United States would invade Venezuela, which had garnered $10.5 million in trades, would remain unresolved.[xiv]  According to the market’s Rules, the United States must “commence[] a military offensive intended to establish control over any portion of Venezuela” for the pending trades to resolve in favor of “yes.”[xv]  After Maduro’s capture, Polymarket clarified that the market referred to “US military operations intended to establish control” over Venezuela, so “the snatch-and-extract mission to capture Maduro” was not an “invasion.”[xvi]  Thus, the market would remain open.  This announcement frustrated many traders, who accused Polymarket of arbitrariness and unfairness.[xvii]

Finally, Polymarket has been criticized for allowing direct wagers on armed military conflict, which other prediction market platforms have not been willing to do.[xviii]  Polymarket offers markets on conflicts ranging from whether the United States will strike Iran, whether China will invade Taiwan, and developments in the Russia-Ukraine war.[xix]  On January 11, 2026, 12 United States Senators sent a letter to the Chairman of the Commodity Futures Trading Commission (“CFTC”), which primarily regulates prediction markets.[xx]  The letter explains that contracts speculating on Maduro’s leadership “raise serious national security concerns,” as foreign adversaries could use prediction market odds to their strategic and tactical advantage.[xxi]

The ultimate legality of prediction markets such as Polymarket remains fiercely disputed, with litigation under way in several states.[xxii]  But regardless of the outcome of litigation, the fallout from Maduro’s capture should serve as a wake-up call to operators of all types about the potential dangers of inside trading, market offerings subject to arbitrary interpretation, and national security concerns.

[i] Anne Flaherty, Katherine Faulders, Aaron Katersky, Jon Haworth, Jack Moore, US Captures Maduro, carries out ‘large scale strike’ in Venezuela: Trump, ABC News, (Jan. 3, 2026), https://abcnews.go.com/International/explosions-heard-venezuelas-capital-city-caracas/story?id=128861598 (last accessed Jan. 26, 2026).

[ii] See Case No. 1:11-cr-205-AKH-2, Dkt. No. 259 (S.D.N.Y.).

[iii] What is Polymarket?, Polymarket, https://docs.polymarket.com/polymarket-learn/get-started/what-is-polymarket (last accessed Jan. 26, 2026).

[iv] What is a Prediction Market?, Polymarket, https://docs.polymarket.com/polymarket-learn/FAQ/what-are-prediction-markets (last accessed Jan. 26, 2026).

[v] Hassan Shittu, Trump Jails ‘Venezuela Leader’: Suspicious Polymarket Whales Go Silent After Accurate Bets, Yahoo! Finance, (Jan. 16, 2026), https://finance.yahoo.com/news/trump-jails-venezuela-leaker-suspicious-163206487.html (last accessed Jan. 26, 2026).

[vi] Id.

[vii] Id.

[viii] See Public Integrity in Financial Prediction Markets Act of 2026, H.R. 7004, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/7004/text/ih?overview=closed&format=xml.

[ix] Id.

[x]The “Maduro Trade” Aftermath: Congress Moves to Curb Insider Trading in Prediction Markets, WRAL News (Jan. 18, 2026), https://markets.financialcontent.com/wral/article/predictstreet-2026-1-18-the-maduro-trade-aftermath-congress-moves-to-curb-insider-trading-in-prediction-markets (last accessed Jan. 26, 2026).

[xi] Anas Hassan, Portugal Bans Polymarket Over €4M Insider Trading Scandal, Yahoo! Finance, (Jan. 20, 2026), https://finance.yahoo.com/news/portugal-bans-polymarket-over-4m-155854731.html (last accessed Jan. 26, 2026).

[xii] Id.

[xiii] Adam Roarty, Polymarket Founder Shayne Coplan Hints That Insider Trading is Cool & Sportsbooks are a Scam, CasinoBeats, (Nov. 20, 2026), https://casinobeats.com/2025/11/20/polymarket-founder-shayne-coplan-insider-trading-cool-sportsbooks-scam/ (last accessed Jan. 26, 2026).

[xiv] Amin Ayan, CryptoNews, Polymarket Withholds Payouts on Venezuela Invasion Bets, Sparking Backlash, https://cryptonews.com/news/polymarket-withholds-payouts-on-venezuela-invasion-bets-sparking-backlash/ (last accessed Jan. 26, 2026).

[xv] https://polymarket.com/event/will-the-us-invade-venezuela-in-2025/will-the-us-invade-venezuela-by-january-31-2026?tid=1767561400492 (last accessed Jan. 26, 2026).

[xvi] Id.

[xvii] Lauren Almeida, Gambling platform Polymarket not paying bets on US invasion of Venezuela, The Guardian, (Jan. 7, 2026), https://www.theguardian.com/world/2026/jan/07/wager-platform-polymarket-will-not-pay-out-on-bets-on-us-invasion-of-venezuela (last accessed Jan. 26, 2026).

[xviii] Denitsa Tsekova, Polymarket Steps Into Legal Gray Area by Hosting Trades on War, Bloomberg, (Jan. 14, 2026), https://www.bloomberg.com/news/articles/2026-01-14/polymarket-faces-scrutiny-for-hosting-prediction-markets-on-war-and-conflict (last accessed Jan. 26, 2026).

[xix] See https://polymarket.com/geopolitics (last accessed Jan. 26, 2026).

[xx] While the prediction market industry is arguing for the CFTC to be its sole regulator, several states are seeking to implement regulation or licensing of prediction market operators.  For example, Iowa recently introduced a $10 million licensing fee for prediction market operators.  See Iowa Moves to Regulate Prediction Markets with New Licensing Rules, iGamingToday, (Jan. 26, 2026), https://www.igamingtoday.com/iowa-moves-to-regulate-prediction-markets-with-new-licensing-rules/#:~:text=The%20bill%20makes%20it%20illegal,with%20annual%20renewals%20costing%20%24100%2C000 (last accessed Jan. 27, 2026).  The interplay between federal and state regulation is currently being litigated, and it is too early to tell what the ultimate regulatory framework for prediction markets will look like.

[xxi] Letter from Sen. Catherine Cortez-Masto to Chairman of Commodity Futures Trading Comm’n (Jan. 11, 2026), https://www.cortezmasto.senate.gov/wp-content/uploads/2026/01/2026-January-Cortez-Masto-et-al-Letter-to-CFTC-Chair-Selig-re-Suspicious-Polymarket-Trade.pdf.

[xxii] See Sara Dalsheim, As Predicted, Prediction Markets Dominate G2E Discussions, Ifrah on iGaming, (Oct. 13, 2026), https://www.ifrahlaw.com/ifrah-on-igaming/as-predicted-prediction-markets-dominate-g2e-discussions/ (last accessed Jan. 26, 2026).