Prediction markets tied to a potential Iran ceasefire are drawing renewed scrutiny after traders positioned for de-escalation ahead of a market-moving shift in U.S. policy, raising fresh questions about whether insider trading may be playing a role.
The activity has focused attention on Polymarket’s international platform, where markets tied to war can trade freely and where recent trading patterns have pointed to the possibility that some participants had an informational advantage.
At the same time, similar timing questions also surfaced in traditional financial markets, with unusually large trades in oil and equity futures reported shortly before a U.S. announcement signaling a shift toward de-escalation.
Together, the developments highlight a growing challenge for prediction markets, as they intersect with the same real-world events that move traditional financial markets but operate under less clearly defined regulations around the use of nonpublic information.
Ceasefire trades raise timing questions
The scrutiny stems from trading activity in the moments leading up to President Donald Trump’s decision Monday to hold off on increased military action against Iran and pursue a potential diplomatic path.
On Polymarket, odds of a U.S./Iran ceasefire rose sharply, moving from around 6% to roughly 24% over a short period, according to reporting from The Guardian. That shift was accompanied by a cluster of newly created wallets placing roughly $70,000 in trades that would return more than $800,000 if the outcome materializes.
Analysts cited in the report said the timing and structure of the trades resembled patterns often associated with traders who may have access to better or earlier information than the rest of the market. One expert said the activity “looks like someone trading on inside information,” while noting that the pattern alone is not proof of wrongdoing.
The trades also drew attention because at least one account active in Iran-related markets had previously built a track record of successful trades tied to earlier developments in the conflict, including positioning around U.S. strike scenarios.
The activity has raised questions about whether the trades reflect better interpretation of public data or an informational edge over other market participants.
Parallel signals in traditional markets
Data cited by CBS News showed a spike in crude oil futures trading early on March 23, just minutes before President Trump posted on social media shortly after 7 a.m. ET that the U.S. had held “productive” talks with Iran, with roughly $580 million in contracts traded in what is typically a low-volume window. An economist quoted in the report said the activity was “enough to raise eyebrows,” particularly given the lack of any clear public catalyst.
Separate reporting from Bloomberg found that billions of dollars in oil and equity futures changed hands roughly 15 minutes before the announcement, indicating that positioning ahead of the news occurred across multiple markets.
The trades preceded a sharp market reaction once the announcement became public, with oil prices falling and stocks rallying on expectations of de-escalation.
SEC, CFTC take different approaches to insider trading
Suspicions about the trading activity highlight a key difference in how insider trading is handled across different markets.
In securities markets, trading on material nonpublic information (MNPI) is clearly prohibited and routinely enforced by the Securities and Exchange Commission (SEC).
That framework is grounded in the anti-fraud provisions of the Securities Exchange Act of 1934, particularly Rule 10b-5, which the SEC uses to pursue insider trading cases involving the misuse of MNPI. Courts have interpreted those provisions to prohibit trading on such information, and Rule 10b5-1 clarifies that trading while aware of it can be used as evidence of insider trading.
The SEC actively enforces these rules, routinely investigating unusual trading patterns and bringing civil cases that can result in fines, disgorgement of profits, and trading bans. Criminal charges can also be pursued by the Department of Justice.
The Commodity Exchange Act gives the CFTC authority to police fraud and manipulation in derivatives markets, including through Section 6(c)(1). The agency’s primary anti-fraud rule, Rule 180.1, implements that authority and is used to pursue deceptive or manipulative trading activity.
But unlike securities law, trading while simply in possession of nonpublic information is not, on its own, clearly prohibited. Instead, the CFTC generally must show that the trader engaged in deception or manipulation, not just that they had an informational advantage.
Recent CFTC guidance has acknowledged insider trading risks in prediction markets and emphasized surveillance and enforcement, but has focused more on market design and participant restrictions than on establishing a direct rule for trading on nonpublic information. That leaves a system where trading patterns that would draw immediate insider trading scrutiny in securities markets may not violate a clearly defined rule in prediction markets.
The SEC and CFTC have signaled closer coordination on oversight of emerging markets, though it remains unclear whether that will lead to more consistent standards for handling insider trading across market types.
Polymarket’s role and limits of regulatory authority
While CFTC rules govern trading on regulated platforms, the flagged Iran ceasefire trades occurred on Polymarket’s international exchange, which operates outside the agency’s oversight.
Polymarket does operate a CFTC-regulated U.S. platform, though it currently offers a narrower set of markets focused on sports. Kalshi, Polymarket’s biggest U.S.-regulated competitor, operates under CFTC oversight and has been emphasizing restrictions on markets tied to war or military conflict, as well as efforts to track possible insider trading.
Both companies have recently moved to strengthen market integrity controls. Polymarket published updated rules outlining prohibitions on insider trading, manipulation, and participation by individuals with direct influence over outcomes across both its international and U.S. platforms. Kalshi has taken similar steps, highlighting surveillance and participant restrictions as part of its own integrity framework.
While Polymarket’s rules apply to both platforms, the Iran ceasefire trades drawing scrutiny occurred on its offshore venue, where enforcement is harder to evaluate. Without the same level of identity verification required on regulated exchanges, including know-your-customer (KYC) requirements, traders can operate through anonymous crypto wallets, making it more difficult to determine who is behind a position.
Polymarket has said it uses surveillance systems to identify unusual or suspicious trading activity, but it has not detailed how, or whether, those tools can reliably link trades to real-world identities. That leaves open questions about how insider trading rules are enforced in practice on its international platform.
To date, there have been no publicly reported cases of insider trading violations resulting in identified individuals or penalties on Polymarket’s global platform, though its formalized integrity framework is relatively new and may change how such cases are surfaced. By contrast, in its recent public push touting integrity protections, the CFTC-regulated Kalshi disclosed two insider trading violations, tied to its MrBeast and election markets, identifying the accounts involved and outlining its enforcement actions.
Congress targets insider trading risks in prediction markets
While platforms and the CFTC grapple with how to police insider trading in prediction markets, several proposals in Congress this year have been introduced to address those risks.
Some proposals introduced this month would restrict participation in different ways. The End Prediction Market Corruption Act would prohibit the president, members of Congress, and other senior officials from trading on prediction markets altogether. Meanwhile, the BETS OFF Act would go further by banning markets tied to government actions and military operations, as well as other events where participants may have knowledge of or influence over the outcome.
Just today, lawmakers introduced the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act, or PREDICT Act, a bipartisan proposal that would prohibit members of Congress, the president, and a broad range of senior government officials from trading on prediction markets tied to political events or policy decisions. The restrictions would extend to spouses, dependents, and senior staff, and would impose a 10% penalty on the value of violating trades and require the forfeiture of any profits to the U.S. Treasury.
That approach mirrors existing restrictions in traditional financial markets. Under 2012’s STOCK Act, government officials are already prohibited from using nonpublic information to trade securities regulated by the SEC. The PREDICT Act would extend that logic more explicitly to prediction markets, where comparable guardrails are less clearly defined.
The recent congressional proposals aimed at prediction markets reflect a growing view of some lawmakers that limiting who can trade may be a more direct way to address insider trading risks than relying solely on platform rules or existing regulatory frameworks.
A test case for insider trading rules
The recent activity around Iran-related markets may serve as an early test of how insider trading is handled in prediction markets.
As platforms, regulators, and lawmakers each take steps to address those risks, the effectiveness of those efforts will likely be measured by whether suspicious trading can actually be identified and, if necessary, investigated and acted upon. Just as important, those efforts could help build public confidence that these markets are fair, and that everyday traders are not at a disadvantage against participants with access to nonpublic information.
At the same time, the scrutiny highlights the limits of those efforts. Even as platforms tighten rules, regulators apply existing frameworks, and lawmakers pursue new restrictions, many of the markets drawing attention remain on Polymarket’s international platform, which operates outside U.S. jurisdiction. That raises questions about how effectively suspicious trading on that venue can be detected, investigated, and properly addressed.
