Polymarket has investigated 'dozens' of election-related cases
Polymarket has investigated "dozens" of bets on its prediction markets related to the midterm election, according to the company's head of global intelligence and investigations, Shana Bautista.
uncertain
Polymarket → investigate → intelligence
At least two of these Polymarket investigations have been referred to its regulator, the U.S. Commodity Futures Trading Commission, according to a person who is familiar with the probes, but not authorized to speak publicly about them.
uncertain
who → refer → them
These investigations into election insider trading and manipulation come as prediction market Polymarket — and its chief competitor Kalshi — have exploded in popularity over the past year.
asserted
Polymarket → come → year
But the fast-growing industry also faces significant legal challenges from states and political pushback from lawmakers who argue betting on the outcome of elections poses serious risks to the democratic process.
asserted
betting → grow → process
In April, Kalshi banned and fined a handful of political candidates from betting on themselves.
asserted
Kalshi → ban → themselves
A month later, NPR reported that campaign staffers had made "thousands" using insider polling information to bet on their own candidates on platforms like Polymarket and PredictIt.
asserted
staffers → report → Polymarket
Polymarket's Bautista — a former FBI official and cryptocurrency analyst — told NPR her team of 16 and a new election surveillance system are actively policing election bets ahead of the Nov. 3 midterms.
asserted
team → tell → midterms
"If you have information that you have a duty to protect, don't trade on it," Bautista said.
asserted
Bautista → have → it
If you decide that you are smarter and can do it, we will find you."
asserted
we → decide → you
Bautista joined Polymarket in June.
asserted
Bautista → join → June
She oversees information gathered from both the U.S.-regulated version of Polymarket, which requires users to provide their real identities, and its bigger brother, Polymarket International, which is essentially unregulated and where trading can be done anonymously and with cryptocurrency.
asserted
trading → oversee → cryptocurrency
Despite this, Bautista said crypto trades are rarely completely anonymous.
asserted
trades → say → this
"There's never been a case that we work where we haven't been able to identify, potentially, who these people are," Bautista said.
asserted
Bautista → be → ?
She said her election surveillance system pulls in "gigabytes" of data on each user from social media, Federal Election Commission data, cryptocurrency companies, banking partners, statistical models and other public information sources.
asserted
system → say → media
If a user hits a certain number of internally-defined red flags, Bautista gets an alert on her phone.
asserted
Bautista → hit → phone
"We're getting hundreds of alerts a day," Bautista said.
asserted
Bautista → get → alerts
When asked about the specific detection criteria and thresholds, Bautista did not comment citing system security.
asserted
Bautista → ask → security
But she said insider trading and market manipulation all look the same regardless of the financial market.
asserted
trading → say → market
"We're looking at threat vectors and risk areas that have existed for decades in traditional markets," Bautista said.
asserted
Bautista → look → markets
"But we recognize, too, that when it comes to prediction markets, we're seeing some of the old tried and known tactics, but being applied to a new vector through prediction markets."
asserted
we → recognize → markets
Back in May, Kalshi, Polymarket's top rival, announced its own election surveillance system that also uses FEC data.
uncertain
that → announce → data
Their system purportedly blocks any campaign staffer listed by the FEC from betting on an election.
asserted
system → block → election
In July, Kalshi said it had blocked "dozens" of staffers from trading on elections, though at least one staffer told NPR they got around this.
asserted
they → say → this
The staffer shared records of their recent trades and spoke to NPR on the condition of anonymity for fear of consequences for their future employment.
asserted
staffer → share → employment
Prediction markets for elections are uniquely vulnerable to market manipulation and insider trading, said Rajiv Sethi, an economics professor at Barnard College at Columbia University, who has studied prediction markets for decades.
asserted
who → say → decades
"[Election prediction markets] have the possibility of being a self-fulfilling prophecy," Sethi said.
asserted
Sethi → have → possibility
"Elections have the property that what one believes is going to happen can actually affect what happens if a candidate is thought to be losing momentum or the campaign is flagging."
asserted
campaign → have → momentum
Bautista said her Polymarket team and surveillance system is learning from past cases and putting their feet in the shoes of would-be insider traders and market manipulators.
asserted
team → say → traders
"If I was worried about somebody trying to materially move an election market to make it look like one option was more likely to happen than the other and I identify a pattern where they're opening several different accounts and they're doing that in short bursts and I see device IDs consistent across different trades placed in short succession with new wallets across five or four different accounts," Bautista said.
asserted
Bautista → try → accounts
"If I were to work that case and then action that, the findings of that tactic go back into the process to create the detections."
asserted
findings → work → detections
As prediction markets have exploded in popularity over the last two years, the industry's federal regulator, the CFTC, has done little to police these new financial markets, largely leaving that work to the companies themselves.
asserted
regulator → explode → companies
The Aporia
