Concerns about insider trading in the prediction markets have intensified following a series of high-profile bets on geopolitical events, raising fresh questions about whether it is even possible to curb such practices in a growing industry sector.
According to Austin Weller, a research analyst at blockchain intelligence firm Messery, preventing insider trading is realistically possible by knowing your customer (KYC) actions.
“For KYCD platforms, the most effective approach is to limit access to specific markets for consumers,” Weller told Cointelegraph, adding that state actors could be restricted by political or geopolitical markets.
“It doesn’t completely eliminate abuse, because insiders can still share information with third parties, but it adds a significant barrier and increases the quality of enforcement,” he said.
Problem in non-KYC prediction markets
For non-KYC, or fully automated prediction markets, implementation is extremely challenging and, in some cases, “nearly impossible,” Wyler said.
He said that when wallets are not linked to real-world identities, there is no reliable way to identify traders or determine whether they have access to material non-public information (MPNI).
“Forecast markets may attempt to monitor unusual trading behavior, CAP trade size, or slow trading during sensitive geopolitical periods. However, these measures are easily overlooked,” Weiler added.
“The ban on targeting government officials is only realistically feasible in KYC-based systems. Although all Onchin activity is transparent, transparency alone does not solve the attribution problem. Without identity verification, it is extremely difficult to link Onchin purses to a specific official, state actor, or insider trust.”
Kalshi, Polymarket, Rai: Who Needs KYC and How?
At the time of writing, KYC requirements vary widely among prediction platforms such as Kulshi and Polymarket, while decentralized alternatives do not require identity checks, or may not technically support them.
Kalshi implemented KYC requirements as part of its regulated model under the authority of the US Commodity Futures Trading Commission. On its sign-up page, Kalshi states that it requires basic personal information from users and can request further verification using an ID document.
According to social media reports, Polymarket applies KYC to its US-based users, while non-US versions of the platform operate without mandatory identity checks, with access reportedly available via VPN. The platform does not publicly confirm this in its user guide.
Rai, a decentralized prediction market backed by Yeezy Labs, a company linked to former Binance CEO Changpeng Zhao, does not provide any public information about KYC requirements.
Quantalgraphs contacted Kalshi, Polymarket and Rai for comment on the KYC requirements but did not receive a response at the time of publication.
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The news comes amid intense scrutiny of the major prediction market platform after high-profile bets linked to geopolitical events in Venezuela, including reports from an anonymous trader that U.S. forces had turned more than $400,000 into $30,000 just hours before the capture of former Venezuelan President Nicolás Maduro.
Some US lawmakers, including Representative Richie Torres, have supported legislation including Public Integrity in the Financial Prediction Markets Act of 2026, which aims to prevent government officials from trading in prediction markets when they have material undemocratic information.
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