Prediction markets are threatening national security. Who's gonna fix it?

Summary

Podcast Summary: The Indicator from Planet Money

Episode: Prediction markets are threatening national security. Who's gonna fix it?
Date: May 12, 2026
Hosts: Darren Woods & Ricky Mulvey

Episode Overview

This episode delves into the urgent debate over prediction markets—platforms where people bet on future events, ranging from elections to geopolitical actions. Recent cases of insider trading linked to national security have sparked regulatory scrutiny, notably from U.S. Senator Richard Blumenthal. The hosts explore how these markets operate, current and proposed regulatory frameworks, and the challenges of keeping prediction markets both useful and secure.

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Key Discussion Points & Insights

1. Prediction Markets and National Security Risks

• Insider Trading Case
  • Ricky references the arrest of a U.S. special forces soldier for allegedly betting on a military operation he was involved in:
    • "I remember that American special forces soldier who was just arrested for allegedly betting on the capture of Venezuelan President Nicolas Maduro, a mission he was apparently a part of." (00:38)
  • Such incidents highlight the national security risks of unregulated prediction markets.
• Market Value vs. Regulation Burden
  • These markets can provide real-time sentiment on economic and political events—sometimes more accurately than polls.
  • However, they also complicate regulatory efforts. (00:55)

2. Polymarket: The 'Prediction Market Mullet'

• "Polymarket has a US regulated business in the front and an unregulated international cryptocurrency party in the back." (03:03)
• The hosts coin the phrase “prediction market mullet” to describe Polymarket’s split approach—regulated in the U.S., "Wild West" overseas. (03:16–03:19)
• Main challenge: International, crypto-driven trades are difficult to monitor due to anonymity, even though all bets are visible on the blockchain. (03:19–03:47)

3. Combating Insider Trading

• Collaboration with Authorities
  • Polymarket cooperated with U.S. authorities to identify the allegedly offending soldier (Gannon Ken Van Dyke). (03:47)
  • Partnership with Chainalysis, a blockchain analytics firm, allows tracking of suspicious activity despite crypto's perceived anonymity:
    • "Crypto is not a black hole that covers up bad behavior." — Adam Hart, Chainalysis (04:10)
• Nature of Blockchain Evidence
  • "You can look at reports from the IRS Criminal Investigation Service, and they're seizing more money in crypto than in all other assets combined." (NPR Announcer, 04:22)
  • Every transaction is public and permanent:
    • "All you have to do is make one mistake and that evidence is there forever." (04:51)

4. Limits of Enforcement

• Evading Detection
  • Bad actors can obscure identities with fresh wallets and international accounts—often escaping U.S. jurisdiction. (05:12)
  • However, cashing out to fiat USD often requires a regulated exchange, where identities can be traced. (05:38–05:45)
• Reactive vs. Proactive Compliance
  • Polymarket chooses to investigate suspicious trades after the fact rather than preemptively verify all users’ identities. (05:58)

5. The Regulatory Debate: Senator Richard Blumenthal’s Proposals

• Blumenthal's Standpoint
  • "They really are an American company. They do have an American platform. They say one of their platforms is offshore, but that is a fiction that we need to cut through.” — Senator Richard Blumenthal (06:18)
  • He advocates for regulation that encompasses both U.S. and international operations if they share ties.
• Market Restrictions
  • Blumenthal supports banning markets on “wars, assassinations, and certain kinds of event contracts” that risk manipulation or threaten national security:
    • "There ought to be a ban on prediction market bets concerning wars, assassinations...where there's a public interest in banning those kinds of event contracts.” (06:41)
• The Prediction Market Security and Integrity Act of 2026
  • Treats prediction markets more like sportsbooks, regulated by state commissions. (07:03)
• Balancing Regulation and Utility
  • He clarifies he is not banning gambling or abolishing prediction markets but seeks to protect consumers against abuses:
    • "The laws that I proposed...are designed to protect consumers, betters, everyday people from the kind of concealment, insider information, national security leaks that can harm the public interest.” (07:38–08:23)

6. Advertising and Consumer Protection

• Social Media Loopholes
  • Current bills propose limiting advertising on broadcast TV, not social media—a gap the hosts highlight by showing the Senator viral TikTok ads. (08:31)
  • Example from an ad:
    • "You made money off of gas prices going up. How?"
    • "Dude, I'm on Kalshi. You can trade on stuff like weather, sports news, gas prices, all kinds of real world stuff...” (08:39–08:50)
• Potential Legal Violations
  • Blumenthal notes:
    • "In my view, those ads potentially run afoul of existing consumer protection laws..." (08:57)
  • He pledges to push for enforcement of existing consumer protections against deceptive marketing. (09:16)

7. Where Regulation Stands

• Prediction markets occupy a legal gray area, and even regulators are still grasping the scope of the challenge.
  • Blumenthal describes exposure to social media advertising as:
    • "It's like the dark side of the moon. I suspected it was there, but I didn't know there was so much of it." (09:39)
• There is a sense of regulatory catch-up as markets evolve rapidly.

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Memorable Quotes and Moments

• "You're saying they've built a sort of a prediction market mullet." — Darren Woods, (03:16)
• "I suspected it was there, but I didn't know there was so much of it." — Senator Blumenthal, on the volume of TikTok prediction market ads (09:39)
• "Crypto is not a black hole that covers up bad behavior." — Adam Hart, Chainalysis (04:10)
• "There ought to be a ban on prediction market bets concerning wars, assassinations..." — Senator Blumenthal (06:41)
• "All you have to do is make one mistake and that evidence is there forever." — NPR Announcer (04:51)

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Key Timestamps

• 00:38 — Insider trading case introduction
• 03:03 — Polymarket’s structure explained
• 04:10–04:22 — Chainalysis and tracing crypto
• 06:18 — Senator Blumenthal on U.S. vs. offshore platforms
• 06:41 — Blumenthal details high-risk events to ban
• 07:03 — Regulatory bill outlined
• 08:31–08:57 — TikTok ad discussion and consumer protection
• 09:39 — Blumenthal’s “dark side of the moon” remark

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Summary

This episode presents a nuanced look at the evolving world of prediction markets, juxtaposing their economic benefits with the new regulatory and national security risks they introduce. Through clear examples and a direct interview with Senator Blumenthal, the hosts unpack the technical and ethical dilemmas facing both market operators and lawmakers. The show underscores that, while transparency and data-driven insights can empower users, unchecked markets represent profound risks—leaving both industry and government scrambling to keep up.

Transcript

[Podcast Host]

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[NPR Announcer]

NPR.

[Darren Woods]

Prediction Markets have an Insider Trading Problem

[Ricky Mulvey]

yeah, I remember that American special forces soldier who was just arrested for allegedly betting on the capture of Venezuelan President Nicolas Maduro, a mission he was apparently a part of.

[Darren Woods]

I can't believe the story, but that is the world we're in these days. It's mind boggling.

[Ricky Mulvey]

Could have been easy money. Still, prediction markets are economically useful. They can provide real time sentiment on things like inflation or the possibility of a recession. And as we know from the last presidential election, they're often more accurate than political polls.

[Darren Woods]

Good, bad or neutral, though, these markets create new problems for regulators. This is the indicator from Planet Money. I'm Darren Woods.

[Ricky Mulvey]

And I'm Ricky Mulvey. Today on the show, we're looking into how these markets can be regulated. We'll see how polymarket is fighting insider trading. And we'll check in with Democratic US Senator Richard Blumenthal, who is hawkish on prediction market regulation.

[Darren Woods]

By the way, this question of regulating prediction markets is so new that in our interview we shared one of those questions that the senator hadn't even considered yet.

[Senator Richard Blumenthal]

I suspected it was there, but I didn't know there was so much of it.

[Darren Woods]

What do we show him? That's after the break.

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[Ricky Mulvey]

Polymarket has taken a few steps to combat insider trading, but it's also in an interesting position. It has a US Regulated business in the front and an unregulated international cryptocurrency party in the back.

[Darren Woods]

You're saying they've built a sort of a prediction market mullet.

[Ricky Mulvey]

Exactly. And the difference between these two businesses is key. In the US Markets must know who their customers are. But here's the thing. The majority of polymarket's trades are done in its international business, and that's the Wild West. Traders can operate anonymously using cryptocurrency.

[Darren Woods]

Still, everybody can see those bets, even if they don't know exactly who's placing them. And that means unusual trades immediately stick out. Like that bet on the US Attacking Venezuela.

[Ricky Mulvey]

And polymarket did cooperate with the Department of Justice to identify Gannon Ken Van Dyke, the soldier who allegedly placed trades on military action in Venezuela. So actually, he wasn't that anonymous.

[Darren Woods]

Right. Polymarket recently partnered with a third party investigator to track cryptocurrency movements across the blockchain. They want to track down suspicious trades.

[Ricky Mulvey]

That third party company is called Chainalysis. They specialize in fraud detection in the crypto space. At Adam Hart works on its investigations team. He says crypto is not a black hole that covers up bad behavior.

[NPR Announcer]

If you look at the record of kind of public sector agencies seizing illicit funds in the past five years, some of the best tracers in the world are in the US Government. You can look at reports from the IRS Criminal Investigation Service, and they're seizing more money in crypto than they are in kind of all other assets combined.

[Darren Woods]

Transactions are written into the blockchain. The blockchain being the list of all the trades made with the cryptocurrency. Investigators can look at that list.

[NPR Announcer]

So all you have to do is make one mistake and that evidence is there forever. We don't have to catch it today. We might figure it out in, in five years from now. But that evidence is still there.

[Ricky Mulvey]

Van Dyke allegedly asked Polymarket to delete his account after the trades cashed in. The Department of Justice says he even tried to change his email address registered to his crypto exchange account.

[Darren Woods]

A sophisticated criminal might be more careful. They can try to evade detectives using fresh wallets, hiring money launderers, and using coins that promise to be untraceable. And if they are located internationally, using polymarket's international side, bad actors may be out of reach of US authorities.

[Ricky Mulvey]

In other words, congrats, you found the account that was insider trading. The bad news is that they're located in North Korea.

[Darren Woods]

These crypto detectors have one advantage though. It's tough to hide your identity when you want to cash out for real dollars.

[NPR Announcer]

Many people, you know, you're cashing in and cashing out at a regulated entity, and that regulated entity is where investigators would go to, to identify, you know, that link between the on chain address and your, your identity in the real world.

[Ricky Mulvey]

So polymarket wants to track insider trading, but it would rather play a cat and mouse game after the fact than check the identities of everyone participating.

[Darren Woods]

Senator Richard Blumenthal, a Democrat from Connecticut, believes that polymarket can't have it both ways. Having both a US regulated website and an unregulated non US website, they really

[Senator Richard Blumenthal]

are an American company. They do have an American platform. They say one of their platforms is offshore, but that is a fiction that we need to cut through.

[Ricky Mulvey]

He also wants to restrict the kinds of markets these platforms have. Very broadly, he wants to ban markets that are susceptible to manipulation and those that threaten national security.

[Senator Richard Blumenthal]

I think there ought to be a ban on prediction market bets concerning wars, assassinations, certain kinds of events where because of the event itself or because of the kind of information that's involved, there's a public interest in banning those kinds of event contracts.

[Darren Woods]

The question for regulators though is how much regulation is too much regulation. Richard's bill, the Prediction Market Security and integrity act of 2026 is a sweeping piece of legislation. It would treat them more like sportsbooks that are regulated by state commissions.

[Ricky Mulvey]

Of course, FanDuel and DraftKings are just gambling. They also take a big chunk of each bet. On the other hand, while prediction markets do have sports bets, they take a

[Darren Woods]

smaller cut and they also help answer big questions like who's going to be the next president.

[Ricky Mulvey]

So do you see an economic utility in this and is it important to preserve that?

[Senator Richard Blumenthal]

Well, first let me make clear I'm not banning gambling. I'm not in favor of prohibiting gambling, nor am I trying to abolish prediction markets. And the competition between them may be a good thing if it cuts the cost to the betters and makes the whole process more transparent and more fair. The laws that I proposed to provide for greater oversight to online gambling and to make the prediction markets more honest and transparent are designed to protect consumers, betters, everyday people from the kind of concealment, insider information, national security leaks that can harm the public interest.

[Darren Woods]

Regulators are still figuring out what they should even regulate. This is where those screenshots come in that we shared with the Senator.

[Ricky Mulvey]

His bill would limit how prediction markets advertise on broadcast television but not social media. We showed him some TikTok ads, including this one.

[Darren Woods]

You made money off of gas prices going up. How?

[Podcast Host]

Dude, I'm on call shit. You can trade on stuff like weather, sports news, gas prices, all kinds of real world stuff. And I love it because you can see the potential return before you even place a trade.

[Darren Woods]

Another ad showed a woman claiming she was able to pay her rent because of the money she made on Kalshi predictions.

[Senator Richard Blumenthal]

In my view, those ads potentially run afoul of existing consumer protection laws, federal laws that prohibit deceptive and misleading marketing, as well as state laws that mirror those federal laws.

[Darren Woods]

His point is that there are existing federal laws that could be applied here to these types of social media ads,

[Senator Richard Blumenthal]

and I'm going to be taking action to make sure that laws are enforced against existing ongoing violations of the protections on the books.

[Ricky Mulvey]

Right now what's clear is that prediction markets are a new frontier, even for a senator who proposed a law to regulate them but isn't a tiktoker. Although maybe Richard just needs to step up his social media game.

[Senator Richard Blumenthal]

It's like the dark side of the moon. I suspected it was there, but I didn't know there was so much of it.

[Darren Woods]

So it seems like the politicians and the platforms are still figuring it out. This episode was produced by Julia Ritchie with engineering by Jimmy Keeley. It was fact checked by Sierra Juarez Cake and Kaden edits the show and the indicator is a production of npr.

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