Concerns about insider trading on prediction markets are mounting after a series of well-timed wagers tied to geopolitical events, raising doubts about whether abuse can be meaningfully controlled as the sector grows. According to analysts at Messari, identity verification remains the strongest — and in some cases the only — practical safeguard.

Austin Weiler, a research analyst at Messari, said prediction markets that enforce Know Your Customer rules are far better positioned to limit insider trading than fully anonymous platforms.

Related reporting: Trump remarks on jailed Venezuela “leaker” draw fresh attention to prediction market bets

“For KYC’d platforms, the most effective mechanism is to restrict access upfront for users to specific markets,” Weiler told Cointelegraph, noting that government officials or state-linked actors could be barred from trading on

political or geopolitical outcomes. While such controls do not eliminate abuse entirely, he said they raise the bar for enforcement and accountability.

“Bans targeting government officials are only realistically enforceable in KYC-based systems. While all onchain activity is transparent, transparency alone does not solve the attribution problem. Without identity verification, it is extremely difficult to link an onchain wallet to a specific official, state actor, or insider with confidence.”

Anonymous markets face structural limits

Weiler argued that policing insider trading on non-KYC or fully onchain prediction markets is extremely difficult and, in some cases, nearly impossible. Without links between wallets and real-world identities, platforms have no reliable way to determine who is trading or whether participants have access to material nonpublic information.

Some decentralized markets attempt to mitigate risk by monitoring unusual trading patterns, capping trade sizes or slowing activity during sensitive periods. However, Weiler said these measures are easily circumvented and offer limited protection when traders can freely create new wallets or route activity through intermediaries.

Trading volumes in prediction markets hit almost $6 billion by mid-January 2026. Source: Dune

How KYC rules differ across major platforms

KYC requirements vary widely across the prediction market landscape. Kalshi operates under the oversight of the Commodity Futures Trading Commission and requires users to submit personal information during onboarding, with additional identity verification in some cases.

Polymarket applies KYC to users based in the United States, while access outside the US has been reported to operate without mandatory identity checks, though the platform does not publicly confirm those details. Fully decentralized alternatives, such as Opinion, do not disclose any formal KYC requirements and may lack the technical ability to enforce them.

Cointelegraph reached out to Kalshi, Polymarket and Opinion for comment but had not received responses at the time of publication.

Sign-up process on Kalshi. Source: Kalshi

Regulatory pressure builds after high-profile trades

The debate has intensified following reports of large profits made on prediction markets ahead of geopolitical developments in Venezuela, including claims that an anonymous trader turned $30,000 into more than $400,000 shortly before US forces captured former Venezuelan president Nicolás Maduro.

US lawmakers are increasingly scrutinizing the sector. Representative Ritchie Torres has backed proposals such as the Public Integrity in Financial Prediction Markets Act of 2026, which would bar government officials from trading on prediction markets when they possess material nonpublic information.

For Messari’s Weiler, the takeaway is clear: without identity verification, enforcement tools remain blunt. Even with KYC, insider trading risks persist, but the absence of it leaves regulators and platforms with few realistic options to intervene.