Why prediction markets are attracting the interest of Wall Street and law enforcement scrutiny
Law enforcement’s scrutiny of the trading involving the prediction markets should come as no surprise, top financial cops say – as they are no longer just apps used by sports fans to wager on games, but high-profile venues used by sophisticated traders to gauge risks across global events, On The Money has learned.Prediction market volume is soaring; monthly trading volume is now $20 billion, up from just $1.2 billion in 2025.Much of that volume is based on wager on sports – what teams will advance in March Madness, or who will win the Super Bowl.But an increasing segment of the betting markets involves Wall Street, and the markets themselves operate in the same fashion as those that deal with futures contracts.
Major market makers are involved in the matching of trades much as they do with stock orders.Plus, major banks are now embracing them as an indicator of where so-called “smart money” is gauging the outcome of major financial events such as interest rate decisions by the Federal Reserve, or the outcome of hostile takeovers such as Paramount Skydance’s successful bid to wrest Warner Bros.Discovery from streaming giant Netflix.Research reports are now increasingly referencing the prediction markets as they might the price of gold or oil.With such growth also comes the potential for fraud.
As The Post has reported federal prosecutors in Manhattan are scrutinizing well-timed bets on prediction markets that have lately grabbed headlines — and are examining whether they may have violated insider-trading laws.Officials at the US Attorney for the Southern District of New York — headed by former Securities and Exchange Commission Chairman Jay Clayton — recently met with reps from Polymarket about lucrative wagers on surprise events like the capture of Nicolas Maduro and missile strikes on Iran, sources close to the situation said.“The action in the prediction markets, like the action in any markets, is stuff that will be looked at,” a source wi...