Prediction Firms Are Flagging Insider Traders. Many Will Not Face Charges.
Experts have long warned that the evermore popular prediction markets would be a magnet for insider traders.New numbers suggest they are right.In the three months ending in June, Kalshi, a leading prediction market, referred 32 possible insider traders to the Commodity Futures Trading Commission, the small federal agency that oversees the industry.
And Kalshi is but one of 13 firms that allow people to wager on how specific events will unfold.The trading commission has as many as 20 ongoing investigations based just on Kalshi’s evidence, according to people familiar with the situation who spoke on the condition of anonymity to describe confidential inquiries.The spate of referrals suggests that the new online betting bazaars, where traders wager billions of dollars a month on everything from sports to politics, have opened the gates to possible manipulation by people with inside knowledge.That has exposed constraints in the federal response to an industry in which President Trump’s family is invested and which he has explicitly said he wants to thrive.One issue is personnel.
As cases of possible wrongdoing mount, the trading commission, the main cop on the beat, is operating with its smallest staff in at least 20 years because of Trump administration cuts.So far, the agency has brought civil charges against just three prediction market bettors.Another is the commission’s own deference to the companies.
The agency has the authority to limit opportunities for insider trading by banning bets on the outcome of events where just a few people are in the know, but it has declined to do so despite growing calls for tougher action, especially from national sports organizations.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience wh...