Three newly created wallets on the decentralized prediction market Polymarket has sparked controversy after collectively earning over $630K by betting on the removal of Venezuelan President Nicolás Maduro mere hours before U.S. forces captured him. The incident has thrust the rapidly growing prediction market industry into the regulatory spotlight and reignited debates about insider trading in crypto betting platforms.
The Suspicious Bets That Raised the Red Flags
According to Lookonchain, three different wallets were very active and made a big bet shortly before President Trump’s announcement that Maduro had been captured. Those wallets were created and funded only days before the announcement and were only used to place significant amounts of money on events associated with Venezuela. Until then, the wallets had remained inactive for any betting activities in other markets.
Wallet 0x31a5 made an investment of around $34,000 and reaped a remarkable profit of $409,900. Wallet 0xa72D put in $5,800 and netted $75,000. A third account, SBet365, invested $25,000 to secure $145,600 in returns. All three accounts focused solely on markets predicting Maduro’s ouster by January 31, 2026, a contract that had been trading at just 5 to 7 cents for weeks before suddenly spiking hours before the military operation became public.
The Regulatory Gray Zone
Polymarket and rival platforms are operating in a gray area of regulation left by traditional financial markets. While the Securities and Exchange Commission strictly forbids insider trading in the stock market, prediction markets are regulated by the Commodity Futures Trading Commission, which has lower requirements.
CFTC Rule 180.1 prohibits trading on material nonpublic information, but only when it is received by the breaching duty, a higher forum that makes it difficult to obtain evidence of its counterpart. Polymarket’s Terms of service does not specifically prohibit insider trading but states any action that violates an applicable law will be in violation of this policy. The amount of trading volume over $44 billion in 2025 is impressive, but the platform has minimal requirements for identifying and verifying users.
Polymarket’s anonymity, combined with the nature of cryptocurrencies, presents challenges when it comes to policing bad behavior; these challenges become even more difficult when working with a centralized exchange that allows for the exchange of cryptocurrency for fiat currency, and hence does not cooperate with the enforcement action taken against Polymarket.
Legislative Response and New Regulations
The Maduro trading incident sparked rapid political backlash. Representative Ritchie Torres said he will introduce the Public Integrity in Financial Prediction Markets Act of 2026, extending STOCK Act principles to prediction markets. The proposal would prohibit federal elective officials, political appointees and employees of the executive branch from trading contracts based on government policy or political outcome. This restriction would apply when they hold material nonpublic information acquired in their official duties.
The proposal comes as prediction markets are rapidly growing and attracting regular and institutional investors for their ability to aggregate information and forecast future events. Advocates for these types of markets believe that they help with determining prices accurately. Insider trading is criticized for making the exchange unfair, limiting retail investors, and eroding market confidence if investors think it’s rigged.
Conclusion
The $630,000 gains on betting on Maduros capture has emerged as a hot spot in the controversy over the regulation of prediction markets. While these platforms provide value in the aggregation of information and incentivize proper forecasting, its structure as it currently exists does not seem to be adequate to prevent insider trading. As industry evolves, addressing the challenges of fairness, transparency, and enforcement will be crucial in determining the success or failure of prediction markets.
