Polymarket probes dozens of election bets ahead of midterms

Polymarket has opened investigations into dozens of election-related bets on its prediction market platform. Shana Bautista, the company's head of global intelligence and investigations, confirmed the number of cases during a recent interview. At least two of these probes have been referred to the U.S. Commodity Futures Trading Commission, the federal regulator for the industry, according to a person familiar with the internal reviews.

The scrutiny comes as prediction markets gain rapid popularity in the lead-up to the November 3 midterm elections. The growth has drawn legal challenges from state governments and criticism from lawmakers who worry that betting on election outcomes interferes with the democratic process. In April, rival platform Kalshi banned and fined several political candidates who wagered on their own races. A month later, reports indicated that campaign staffers had earned thousands of dollars using insider polling data to place bets on Polymarket and PredictIt.

Bautista, a former FBI official and cryptocurrency analyst, joined Polymarket in June. She leads a 16-person team that operates a new election surveillance system designed to police trading activity on both the U.S.-regulated version of the site and its international counterpart. The U.S. platform requires users to verify their identities, while the international version allows anonymous trading with cryptocurrency. Bautista stated that her team can typically identify traders even when they use crypto, noting that no case has remained fully anonymous so far.

The surveillance system processes gigabytes of data per user, pulling from social media, Federal Election Commission records, cryptocurrency companies, and banking partners. When a user triggers specific internal red flags, Bautista receives a phone alert. She reported that the team receives hundreds of such alerts daily. The system looks for patterns similar to traditional market manipulation, such as multiple accounts trading in short bursts with consistent device identifiers.

Rajiv Sethi, an economics professor at Barnard College at Columbia University, warned that election markets are uniquely vulnerable because beliefs about outcomes can influence actual results. If a candidate appears to be losing momentum, that perception can affect voter behavior, creating a self-fulfilling prophecy. Sethi noted that this dynamic makes the markets distinct from other financial instruments.

Kalshi announced its own surveillance system in May, which blocks campaign staffers listed by the FEC from betting on elections. In July, Kalshi stated it had blocked dozens of staffers, though one anonymous staffer told NPR they found a way around the restrictions. The CFTC has largely left the policing of these new financial markets to the companies themselves as the industry expands.