EU Regulator Identifies Insider Trading in Prediction Markets
The European Securities and Markets Authority (ESMA) reported that prediction markets are 'rife with inside trading' in a new risk monitor. The report highlights three incidents: new wallets generated 1.2 million dollars shortly before a February strike on Iran; by May, Bubblemaps traced nine accounts linked to 2.4 million dollars in Iran bets that won 98% of the time; a U.S. Army master sergeant was charged with over 400,000 dollars in Polymarket profits related to the capture of Venezuelan president Nicolás Maduro; and in April, suspected tampering with weather sensors for Polymarket contracts led Météo-France to file a police complaint. ESMA criticized platform responses as 'largely reactive,' occurring only after profits are realized. Polymarket's chief legal officer argued that anonymity is not guaranteed, citing the Maduro case. ESMA noted that prediction markets have not gained traction in the EU due to regulatory hurdles, as event contracts may qualify as financial instruments under MiFID II or gambling under national laws. Kalshi and Polymarket restrict users in certain EU countries, but the rationale for exclusions remains unclear. Volumes have surged since ESMA's data collection, with Kalshi and Polymarket reporting quarterly volumes of 8.8 billion dollars and 12 billion dollars, respectively, as of late 2025 and early 2026. By June, their combined monthly volume reached 44.8 billion dollars, with Kalshi alone accounting for 31.5 billion dollars. ESMA also noted that 67% of Polymarket gains went to 0.1% of accounts, while most users reportedly lose money.
-- Price
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