Effective control of insider trading on prediction markets is only feasible with mandatory user verification—KYC. This view was expressed by Messari analyst Austin Weller in a comment to Cointelegraph.
According to the expert, platforms with KYC can restrict trading access for certain categories of individuals, including government officials. Although this does not prevent the transfer of information to third parties, such a barrier significantly raises enforcement standards.
The Decentralization Dilemma
In the case of non-custodial platforms without verification, controlling insiders is “virtually impossible,” Weller believes. The lack of wallet connections to real identities makes it impossible to determine whether a trader possessed non-public information.
“Blockchain transparency does not solve the attribution problem. Without identity verification, it is extremely difficult to confidently link a wallet to a specific official or insider,” the analyst emphasized.
Weller added that monitoring abnormal activity or artificially slowing down trades is ineffective, as these measures are easily circumvented.
Diverse Platform Approaches
Identification requirements among key players in the prediction market vary:
- Kalshi: fully regulated by the CFTC and requires personal data and documents from users.
- Polymarket: applies KYC for U.S. residents. On international markets, mandatory verification is absent, although the platform does not officially comment on this.
- Opinion: a decentralized project associated with YZi Labs, does not disclose information about identity verification requirements.
Political Insiders
The debate over prediction market regulation intensified following a series of large bets on political events.
One incident involved events in Venezuela. A trader turned $30,000 into more than $400,000 just hours before American forces captured the country’s former president, Nicolas Maduro. At the time of writing, the user’s page is unavailable.
The issue’s relevance is confirmed by events in Portugal. The local regulator demanded blocking access to Polymarket, declaring the platform’s activities illegal.
Authorities were alerted by anomalies before the presidential elections. Two hours before the official announcement of results, order volumes exceeded €5 million. Portuguese law prohibits betting on political events.
Despite the expiration of a 48-hour ultimatum, the site continued to operate. It is now planned to be blocked through providers. The regulator warned that it cannot help users recover funds from an unlicensed platform.
Earlier this year, U.S. legislator Ritchie Torres proposed an initiative to ban officials from trading on prediction markets with insider information.
NEW — RITCHIE TORRES (D-N.Y.) will introduce a bill on this.
Bill will be called the Public Integrity in Financial Prediction Markets Act of 2026
Description, per a source:
This bill prohibits federal elected officials, political appointees, and Executive Branch employees… https://t.co/eZZ9BmAMgJ
— Jake Sherman (@JakeSherman) January 3, 2026
As reported, analysts at a16z crypto stated that in 2026 the crypto market will focus on integrating its tools, such as prediction platforms.