If you’ve been using a VPN to sneak onto Polymarket and bet on geopolitical upheaval, the Commodity Futures Trading Commission wants you to know they’re looking. Not eventually. Now.
For the better part of a year, prediction markets looked like the Wild West of fraud. Traders were making suspiciously well-timed bets on everything from the raid on Venezuela to the Iran War. The offshore nature of platforms like Polymarket, which runs on crypto infrastructure technically outside US regulatory reach, created a enforcement gap so obvious it practically invited abuse. But that gap is closing fast, and the agency overseeing these markets is essentially saying it’s tired of waiting.
“We’re going to find them, and we’re going to bring actions,” CFTC Chairman Michael Selig told WIRED this week from the agency’s Washington headquarters. According to reporting from WIRED, Selig stressed that the commission is hunting down American traders bypassing geographic restrictions with VPNs to access unregulated offshore platforms.
The Surveillance Apparatus Is Getting Serious
This isn’t just tough talk. The CFTC is staffing up and, like seemingly every other institution in 2025, leaning hard into AI to process the sheer volume of trading data flowing through these markets.
The agency has built proprietary surveillance systems in-house and armed itself with third-party tools including Chainalysis for cryptocurrency tracing and Nasdaq Smarts for traditional market abuse detection. When you feed mountains of transactional data into machine learning models, Selig explained, patterns emerge that might have taken human analysts months to spot. The software can flag suspicious activity and even help determine where to send subpoenas.
“You’ve got so much data,” Selig said, according to WIRED’s reporting. “When we feed it into AI, we get really great information.”
The prediction market operators themselves are catching on. Kalshi, Polymarket’s main competitor based in the US, has started publicly touting its crackdowns on suspected insider traders and market manipulators. Polymarket itself went through a notable shift this spring, announcing partnerships with Chainalysis and Palantir after months of backlash over suspected insider trading. The company’s CEO had previously argued that insider trading could actually benefit prediction markets, a position that became untenable once the scrutiny intensified.
A Political Pressure Cooker
The CFTC’s suddenly aggressive posture isn’t emerging in a vacuum. In March, Connecticut Senator Chris Murphy told WIRED he suspected White House staffers were making insider trades on war-related contracts. By early April, seven members of Congress were demanding investigations into overseas markets offering military action themed bets, arguing the trades were “morally obscene.”
Selig recently told Congress the agency is pursuing “hundreds, if not thousands” of insider trading tips. That’s not hyperbole designed to reassure legislators. That’s a mountain of cases.
The Extraterritorial Question
Here’s where it gets legally interesting. The CFTC doesn’t have automatic jurisdiction over offshore platforms, but Selig says the agency will use extraterritorial enforcement authority in what he calls “extreme circumstances.” The Dodd-Frank Act gave the commission broader leeway to pursue cases involving foreign swap activities that impact the United States.
But it’s not unlimited power. Selig was candid about the constraints. “In any extraterritorial litigation, there’s going to be challenges to our authority, and that could also impair our ability to bring cases in the future,” he said, according to WIRED. The agency takes a measured approach, referring cases it’s less likely to win to foreign regulators rather than overextending its legal hand.
So far, exactly one person has been charged. In April, federal agents arrested a US Army special forces soldier for trades he made on Polymarket tied to the capture of Venezuelan leader Nicolas Maduro. Polymarket claimed it had flagged the trade to authorities, though the timing raised obvious questions about why it took so long.
The Blockchain Tracing Business Is Thriving
This crackdown is creating real business opportunities for companies like Chainalysis, which now works with both the CFTC and Polymarket. The company organizes blockchain data and adds “attributions and insights” accumulated over years in the crypto space, according to spokesperson Maddie Kenney’s comments to WIRED. Translation: Chainalysis is becoming indispensable infrastructure for regulators trying to trace crypto transactions back to their originators.
The irony is delicious. The technology meant to enable decentralized, unmonitored markets is now being weaponized to do the opposite. Blockchain’s transparency, once pitched as liberation from financial institutions, is becoming the very tool that institutions use to hunt down traders.
What Happens Next?
Selig is making clear this is just the opening act. “We’re surveilling the markets on a global basis,” he told WIRED. The agency’s message is simple: it doesn’t matter if you’re large or small, if you’re betting on military conflicts with inside information on an encrypted platform overseas, they’re coming.
Whether the CFTC can actually deliver on this promise at scale remains uncertain. Enforcement takes resources, legal uncertainty haunts extraterritorial cases, and prediction markets are evolving as fast as regulators can react. But the days of treating offshore crypto markets as a lawless zone where insiders can profit from privileged geopolitical knowledge appear to be ending.
The question is whether the crackdown will actually deter the behavior, or just make traders more careful about covering their tracks.
