Why Insider Trading Is Becoming a Bet in Booming Prediction Markets

A series of well-timed and extremely lucrative wagers placed shortly before the removal of Nicolás Maduro has ignited the latest and most intense debate over insider trading in prediction markets. The trades have prompted lawmakers to question whether some participants are profiting from confidential or non-public information rather than market insight.

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For Tre Upshaw, however, the controversy represents less of a problem and more of an opportunity.

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Upshaw, a 29-year-old former memecoin trader based in Nova Scotia, has built a product designed to spot suspicious activity on prediction markets. His tool, called Insider Finder, scans Polymarket for unusually large or abnormal trades that may suggest someone is acting on inside knowledge. The software is part of his broader analytics platform, Polysights, and flags dozens of questionable transactions on the exchange each day.

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When Upshaw believes the evidence points to potential insider behavior, he shares the activity publicly on social media, allowing subscribers and followers to treat it as a possible trading signal. While he cannot definitively prove that the traders he tracks possess insider information, Upshaw often puts a small amount of his own capital into the same trades to show conviction. By his estimate, roughly 85% of the situations flagged by Insider Finder have ended profitably.

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“In traditional financial markets, trading on that kind of information can be extremely harmful,” Upshaw said in an interview. “But prediction markets function as information oracles. In that sense, insider trading simply speeds up the process of truth discovery.”

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What Upshaw is doing closely resembles the type of surveillance typically handled by regulators in conventional markets, where the use of material non-public information is strictly prohibited. The challenge is that prediction markets remain a relatively new and rapidly expanding space, where the rules around insider trading are far less defined.

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In the U.S., oversight falls to the Commodity Futures Trading Commission (CFTC), which has taken a relatively hands-off approach and has offered little guidance on how it views insider activity in prediction markets.

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Few expect aggressive enforcement, especially given the Trump administration’s generally lighter stance on financial regulation. Adding another layer of complexity, Donald Trump Jr. serves as an adviser to Polymarket and is a partner at 1789 Capital, a venture firm that has invested in the platform.

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Supporters of prediction markets argue that their value lies precisely in their ability to draw out information from those closest to unfolding events. By incentivizing informed participants to put real money at risk, the markets can generate more accurate signals for the broader public. In fact, trading activity tied to Venezuela provided some of the earliest hints that major political developments were underway.

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Still, scrutiny is increasing. Last week, Representative Ritchie Torres, a Democrat from New York, gathered bipartisan support for proposed legislation that would prohibit federal officials from trading contracts linked to policy outcomes if they possess or could reasonably access material non-public information through their jobs.

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One reason Polymarket has drawn particular attention is its transparency. Because it operates on blockchain infrastructure, every transaction is recorded on a public ledger. That openness made it possible for Upshaw to build Insider Finder and track individual trading behavior in near real time.

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Most competing platforms do not offer the same level of visibility. Kalshi, Polymarket’s primary rival, does not operate fully on blockchain technology and does not publicly expose account-level trading records.

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A Kalshi spokesperson said the company conducts identity checks, internally flags suspicious behavior, and reports all trades to the CFTC. CEO Tarek Mansour has said the platform enforces anti-manipulation rules modeled after major U.S. stock exchanges, noting that such practices are banned because they undermine fairness.

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Despite receiving significant backing from Intercontinental Exchange Inc., Polymarket itself exists in a legal gray area. Its main exchange operates internationally and is technically closed to U.S. residents.

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As a result, it does not require identity verification. While Polymarket is currently testing a U.S.-regulated version of its exchange, that platform is not expected to run on blockchain, meaning detailed transaction data may no longer be publicly accessible. The company is re-entering the U.S. market after moving offshore in 2022 and settling prior allegations with the CFTC. Polymarket declined to comment.

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A CFTC spokesperson said the agency reviews contracts listed on regulated exchanges but has limited authority outside its jurisdiction. The controversial Maduro-related trades, they noted, occurred on an unregulated platform and involved anonymized participants.

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Upshaw believes demand for tools like Polysights will continue to grow as more retail and professional traders allocate capital to prediction markets covering sports, politics, culture, and global events.

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The platform currently has about 24,000 users, with roughly 5,800 active on a monthly basis. Upshaw said the company is close to finalizing a $2 million funding round and has received support from Polymarket, including a $25,000 grant and participation in its builders program.

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Insider Finder has already built a reputation for spotting meaningful signals. In October, the tool flagged a $40,000 wager from a newly created crypto wallet betting that OpenAI would launch a web browser by the end of the month. The bet caused Polymarket’s implied probability to jump from 75% to 95%. Minutes later, OpenAI CEO Sam Altman teased a new product online ultimately revealed to be a browser earning the trader about $7,000.

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Upshaw highlighted the trade publicly and, in cases where his confidence is especially high, commits a few hundred dollars of his own money to align incentives.

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Notably, while his system flagged suspicious trades tied to Venezuela, Upshaw chose not to promote them or invest alongside them. “This kind of behavior is hard to stop,” he said. “The best you can do is identify it and if people see it, help them trade around it.”

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Legal experts say recent cases are drawing increased attention to the CFTC. While insider trading has long been illegal in equities markets, it remains a relatively new concept for prediction markets. Still, Peter Malyshev, a partner at Cadwalader Wickersham & Taft LLP, noted that government officials or journalists trading on privileged information would likely fall under existing laws governing the misuse of material non-public information.

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