Insiders Are Cashing In on Prediction Markets

Summary

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The Journal. – "Insiders Are Cashing In on Prediction Markets"

Date: February 17, 2026
Hosts: Ryan Knutson & Jessica Mendoza
Guest: Kalin Ostroff
Theme: The explosive growth of prediction markets and the rise of insider-driven bets

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Episode Overview

This episode investigates the surging popularity of online prediction markets, where users can wager on everything from politics to entertainment—even monumental world events. The hosts and guest dig into a striking trend: insiders using nonpublic information to make highly lucrative bets, raising questions about market fairness, legality, and the societal risks of this burgeoning industry.

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Key Discussion Points & Insights

What Are Prediction Markets?

[03:56] – [05:33]

• Polymarket and Kalshi are leading platforms; the former uses crypto, the latter, dollars.
• Bets range from politics and sports to outlandish options ("Will Jesus Christ return by 2027?").
• Accessibility and breadth have never been greater—"you can bet on pretty much everything."
• Accuracy claims: Markets have predicted real-world outcomes, sometimes even outperforming traditional polling, as in the 2024 U.S. election.

Quote:
"These prediction markets have actually been pretty accurate when it comes to elections and economic indicators."
—Ryan Knutson [05:33]

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The Insider Edge: Super Bowl Bets and Other Striking Examples

[00:05] – [02:01] | [07:11] – [10:04]

• The episode begins with a profile of a mystery bettor who placed 19 highly specific bets on the Super Bowl halftime show; 17 were correct, netting almost $17,000.
  • Example bets: $19k on Lady Gaga making a surprise appearance, $10k on Travis Scott not performing, $200 on Bad Bunny’s opening song.
  • The timing and precision suggest inside information rather than luck.
• Other cases:
  • Alpha Raccoon: Accurately bet on Google's internal events, winning nearly $1 million.
  • International affairs: Individuals made fortunes betting on precise timings of armed conflict (Israel/Iran) and regime changes (Venezuela).
• Implications: High probability that insiders are cashing in on nonpublic, sensitive, or confidential information.

Quote:
"They're either a really, really lucky trader or they knew something ahead of time."
—Kalin Ostroff [01:38]

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The Allure and Risks of Prediction Markets

[06:09] – [07:11] | [18:17] – [20:23]

• Platforms market themselves as both entertainment and viable "side hustles"; some users make life-changing sums.
• While ordinary users treat it as gambling, insiders exploit their knowledge for large, low-risk returns.
• For average users, the markets are stacked:
  "That's not really a fair market for you, right? Like you're going up against people who have more information than you." —Kalin Ostroff [18:26]
• Risks extend to national security: Dissemination of sensitive, government-protected intelligence through betting behavior.
• Manipulation concern: The line blurs if people with the power to affect outcomes are betting—citing the Coinbase CEO intentionally saying words tracked by a Polymarket bet during his company’s earnings call.

Quote:
"If you are a normal person betting in those, that's not really a fair market for you, right?"
—Kalin Ostroff [18:29]

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Legality, Regulation, and the Gray Area

[12:42] – [17:56]

• Traditional insider trading (on Wall Street) is illegal and actively prosecuted, but equivalent clarity is lacking for prediction markets.
• Regulatory bodies (CFTC in the US) are beginning to scrutinize; however, prediction markets have operated in a legal gray area.
• Differences among platforms:
  • Polymarket: Looser international market, bets restricted for US customers—but easy to bypass with VPN.
  • Kalshi: US-regulated, requires ID verification, claims policing for insider trading via monitoring and surveillance.
  • Detection limits: Even identity verification can’t catch, say, a bettor with a friend who knows the outcome.
• Ongoing debate: What counts as "insider" information in these new domains?

Quotes:
"It's sort of an inevitability that this will happen and there's a lot of benefits from it and… people will adapt."
—Shane Copeland, Polymarket CEO [11:20]

"So prior to recently, we really hadn't seen much action from regulators on this idea of insider trading on prediction markets… but that's kind of the first inkling that we've seen that this is going to be an area where regulators are starting to look more and more at."
—Kalin Ostroff [16:39]

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The Path Forward: Uncertainties & Tensions

[20:44] – [22:08]

• Platforms are rapidly evolving—regulation, enforcement, and internal safeguards lag behind innovation.
• The field remains in its infancy, with the playbook for handling manipulation and insider behavior still being written.
• Major financial and tech players (Robinhood, DraftKings, FanDuel, even Trump’s media company) are launching their own prediction markets.
• The episode closes with uncertainty about whether platforms like Polymarket will bolster anti-insider protections and how regulators will act.

Quote:
"All of these kind of new platforms start as these very kind of immature products that figure out how they're going to deal with regulation and manipulation… we're still at a really young age for this to try and figure out how this develops."
—Kalin Ostroff [21:06]

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Notable Quotes & Moments

• "People have the ability to put money down on things they couldn't historically, and it's way more accessible than it's ever been."
  —Kalin Ostroff [02:01]
• "The idea of prediction markets is that they present themselves as a vehicle to get more accurate information than you might be able to get from traditional sources."
  —Kalin Ostroff [10:04]
• “People going and having an edge to the market is a good thing.”
  —Shane Copeland [11:12]
• "There's all of these different ways in which you can have potential manipulation of prediction markets, and those… can be really hard to navigate."
  —Kalin Ostroff [20:23]

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Important Timestamps

• [00:05] — Anonymous Super Bowl bettor’s winning streak
• [04:58] — Scope and oddities of betting markets
• [05:41] — Prediction markets outperforming traditional polls
• [07:11] — Discussion of insider trading, with Google and geopolitical examples
• [10:04] — Is insider trading a feature or a bug?
• [12:42] — Legal status of insider trading in finance vs. prediction markets
• [14:43] — How Kalshi verifies identity and enforces surveillance
• [18:26] — Unfairness for regular bettors; security and manipulation issues
• [19:12] — The Coinbase CEO's tongue-in-cheek response to Polymarket bets
• [21:01] — The nascent state of the industry and regulatory uncertainty
• [22:08] — Market expansion and mention of new entrants

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Summary

The episode provides a nuanced look at how prediction markets have entered the mainstream, creating both lucrative opportunities and thorny ethical challenges. As insiders exploit information advantages, regulatory frameworks struggle to adapt—raising the stakes for fairness, privacy, and even national security. Despite immediate risks and unresolved questions about legality and manipulation, these markets are expanding rapidly, signaling a new era in both speculation and information flow.

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For those interested in the intersection of finance, technology, and policy, this episode dissects the cutting edge—and moral gray zones—of prediction markets with candid discussions, real-world examples, and sharp expert analysis.

Transcript

[Ryan Knutson]

Shortly before the super bowl, someone went on polymarket, that site where you can bet on everything from sports to politics to the weather, and placed 19 very specific bets. I sat down with our colleague Kalin Ostroff to take a look at that person's account. All the trades on polymarket are public, but users can be anonymous. I want you to just, like, walk us through, like, what we're looking at here. This is the guy.

[Kalin Ostroff]

The super bowl guy. The super bowl guy, yeah. So this page is the page of someone who bet very, very well on who would be performing at the super bowl halftime show.

[Ryan Knutson]

The person bet around $19,000 that Lady Gaga would have a surprise performance. They bet $3,000 that Cardi B would too. They bet $10,000 that Travis Scott would not perform. And they bet $200 that the headliner, Bad Bunny, would open with the song Titi me frigunto. And 17 of those 19 bets were correct. The person won almost $17,000.

[Kalin Ostroff]

Yeah. And scroll up because I'm curious at one more thing. So this shows that the first trades that they made were right before the super bowl, so they had not traded. And if you scroll down, you'll notice that there's no other trades after the super bowl ones, so there's no other types of markets that they've traded on.

[Ryan Knutson]

So based on what you are seeing here on this person's account, what can you deduce about what's going on here?

[Kalin Ostroff]

So they are either a really, really lucky trader or they knew something ahead of time.

[Ryan Knutson]

As prediction markets explode in popularity, bets like these from people who appear to have inside information are getting a lot of attention and raising a lot of eyebrows.

[Kalin Ostroff]

People have the ability to put money down on things they couldn't historically, and it's way more accessible than it's ever been. And so you have people who can just take their inside information and make a ton of money off of it in a way that you've never really had before.

[Ryan Knutson]

Welcome to the Journal, our show about money, business, and power. I'm Ryan Knutson. It's Tuesday, February 17th. Coming up on the show, prediction markets are taking off and insiders are cashing in.

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[Ryan Knutson]

The concept of prediction markets has existed for years. The two most popular ones today are Polymarket and Kalshi. All Polymarket trades are done in crypto, while you can trade on Kalshi in dollars. And we should say here that polymarket has a data partnership with Dow Jones, the publisher of the Wall Street Journal. These days, my social media algorithm is full of videos about these two companies. They're literally letting people bet on elections, natural disasters, even inflation. On Polymarket, you can bet if this speech is gonna go over or under 65 minutes.

[Shane Copeland]

You have sports, you have CS. Will Giannis be traded? Anyone jailed over Epstein? Iranian Supreme Leader out? Will the US Acquire part of Greenland?

[Ryan Knutson]

All right, so I've got the Polymarket website up to its homepage here, and I'm seeing you can bet on politics, sports, crypto. You can bet on how many times Elon Musk will tweet in a given time period, what the next jobs report will show, who's going to win the most medals at the Summer Olympics. There's a ton of stuff on here.

[Kalin Ostroff]

Yeah. So Polymarket, especially in Kalshi, to some degree, you can bet on pretty like everything. And so there's some markets that kind of make no sense and are kind of almost just there as a joke. Everyone's favorite market is the Jesus market, which you can bet whether Jesus Christ will return by the end of 2027.

[Ryan Knutson]

If he doesn't come by 2027, they're going to make money on that prediction.

[Kalin Ostroff]

I don't know what the odds are right now, but the last time I looked, it was like a 95% chance that he won't return, which implied like a 5% chance that he will.

[Ryan Knutson]

The second coming of Christ aside, these prediction markets have actually been pretty accurate when it comes to elections and economic indicators.

[Kalin Ostroff]

So take the election, for example, the 2024 presidential election. The polls were very close between Donald Trump and Kamala Harris, with the slight exception of on Polymarket, where the people who were putting down money were betting more than the polls that Donald Trump would win. And so that was kind of one of the major inflection points where you saw prediction market be more accurate than traditional polls.

[Ryan Knutson]

And the idea behind that is that if, if you have to put money on the line, that you think this is going to be the outcome, that's different than just telling a pollster what who you're going to vote for because you don't have much of an incentive to be honest.

[Kalin Ostroff]

Right, Exactly.

[Ryan Knutson]

While useful for predicting the future for some, they're also useful for making money. Bro made $1.9 million in a month on polymarket. I made almost $500,000 in profit on prediction markets like Kalshit and Polymarket in 2025 and in the next seven. I have been seeing ads for Kalshi on my social media feeds that advertise it as a side hustle, as a way to pay your rent. Hey man, what's the best side hustle? Oh, cowshe easy Cowshi. What's that? It's an ad which I found very surprising because I'm like, isn't this ultimately a betting app?

[Kalin Ostroff]

It is, and I've seen a couple of those too. And again, this is. It's betting like, unless you are trading with information that isn't public and you are more certain of the outcome, it's. It is a gamble.

[Ryan Knutson]

But it looks like there are people trading with information that isn't public, like that person who made those super bowl bets. And there are a lot of other examples, like someone last year made a bunch of successful bets about things going on inside Google. That account, named Alpha Raccoon correctly guessed 22 out of the top 23 search terms of the year. They also correctly bet on the exact date that a new Gemini AI model would be released in the course of just a few days. The person ended up making nearly a million dollars on these and similar bets. Google didn't respond to a request for comment. Some people are profiting off even more consequential events. In June of last year, as tensions flared up between Israel and Iran and the two countries started firing missiles at each other, someone on Polymarket started placing bets about what was going to happen next.

[Kalin Ostroff]

So there was one user who started making all of these very correct bets on when strikes would start to happen and when a ceasefire would be called. And so because of that, people online were quick to latch onto this and be like, this person is doing really, really well at, you know, this sensitive market. Like, whether Israel was Che Kavan is something not many people should know about, but they might know something that the rest of us don't.

[Ryan Knutson]

This account ended up making more than $150,000 last week. Israeli authorities said they arrested several people, including army reservists, in connection with these bets. A lawyer for one of the reservists said in a statement that there were defects in the indictment and improper conduct by the investigative authorities.

[Kalin Ostroff]

The most recent, one major one, was the ousting of Nicolas Maduro in Venezuela, where, you know, I woke up after New Year's to see that all of a sudden this account had made $400,000 off of betting when Maduro would be ousted. And you could see the bets leading up to the strikes, you know, Those happened at 2am and you could see bets being placed right up until about 11pm the night before. And they were just, you know, doing more and more these chunks of bets that this would happen.

[Ryan Knutson]

Wow.

[Kalin Ostroff]

And so those were kind of the ones that stuck out for us where we were like. We can't say for sure if it's people trading on nonpublic information, but it looks really the. The odds of someone guessing that correctly and then doubling down in the three hours. Like leading up to the hours leading up to the spike. Yeah, like the odds of that are so small that you have to convince me that it's not insider trading at that point.

[Ryan Knutson]

What kind of questions does it raise if this can happen?

[Kalin Ostroff]

I mean, I think the main question it raises is, you know, one of the things that I've really been thinking of is how often are people trading on non public information on these markets? And, you know, how serious is that? And that sort of differs a bit depending on who you speak to. Because to some degree, these trades on non public information are somewhat of a feature and not necessarily a quirk. The idea of prediction markets is that they present themselves as a vehicle to get more accurate information than you might be able to get from traditional sources. And so if you have a platform where anyone, without saying who they are, can say, I think this is going to happen, I'm putting my money down on could incentivize people who are either smarter and find different information or know more about an event than the average person to kind of put that out there in a way that can be seen to everyone.

[Ryan Knutson]

Polymarket in particular has pushed this idea. The company's CEO, Shane Copeland has described his platform as a, quote, global truth machine.

[Shane Copeland]

People going and having an edge to the market is a good thing.

[Ryan Knutson]

Here he is in an interview recently on 60 Minutes.

[Shane Copeland]

Obviously you need to curate them and you need to be really clear and stringent on where the line is drawn and like sort of ethics and we spend a lot of time on that. But it's sort of an inevitability that this will happen and there's a lot of benefits from it and you know, people will adapt.

[Kalin Ostroff]

We spoke to their CEO Shane Kaplan and he was like, the thing with insider trading is that you can see it online if there's a suspected insider, like with the Maduro bets, like with the Israel bets on Yvonne, the market can see what's happening and traders can say, hey, I think this is an insider. And maybe that dissuades people from putting money in that market.

[Ryan Knutson]

So this type of betting is happening, but is it even legal? That's next.

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[Ryan Knutson]

On Wall Street. Insider trading, the use of non public information to make bets on the stock market is a big no no. It's a felony and can lead to fines or prison time. The reason it's illegal is in large part because it's not a fair marketplace if someone knows the outcome in advance. Technically, insider trading is also prohibited on prediction markets which are regulated by the cftc, the Commodity Futures Trading Commission. But those CFTC rules were designed for things like wheat and copper futures and they don't readily carry over to prediction markets.

[Kalin Ostroff]

You know, there's not really rules about like here's the exact parameters of everything you can try and list. There's not rules around, well, you know what, maybe additional information do you need to collect? Because the risk of insider trading might be higher here than it is on other types of financial markets.

[Ryan Knutson]

Making matters more complicated is the fact that some state governments have tried to say that Kalshi and Polymarket need to follow state gambling rules, something that companies disagree with. As a result, Kalshi and Polymarket have been operating in something of a gray area and the two companies have been navigating that in different ways. For instance, a lot of the more out there bets on polymarket are actually not allowed on the US Version of its site.

[Kalin Ostroff]

But polymarket also has this wider international platform where you can bet on all of these geopolitical markets that aren't on the US version. But it is fairly well known that it's not that hard to do that with a vpn. You just change the country where you appear to be located and you can make all sorts of bets.

[Ryan Knutson]

A spokeswoman for Polymarket didn't comment on US customers using VPNs to place bets. The other platform, Kalshi, has taken a different approach. It's legal and regulated in the US And CEO Tarek Mansour says insider trading is banned on the platform.

[Kalin Ostroff]

Kalshi has always very much maintained that they want to be regulated, that they are trying to be the most secure, most inline prediction market platform that people can trade on. And so Kalshi, when you sign up, you have to say who you are. They collect information on your name, where you live, other basic identifying information that helps clamp down on some of that.

[Ryan Knutson]

Right. So they could potentially see, oh, these bets that you're making may actually be something that you work in or would have inside knowledge of.

[Kalin Ostroff]

Right. In some cases. But that being said, it's still really hard to track this. I mean, if your best friend is, you know, the head of marketing for the company handling the super bowl halftime show, like, they wouldn't have a way to know that. So there's a limit as to what they can actually easily figure out in terms of who has insider information and who doesn't.

[Ryan Knutson]

Mansoor also said that new customers go through a vetting process, and then once on the platform, there are surveillance teams that track trading behavior, among other efforts to police for insider trading. Still, it can be hard to figure out what's insider trading and what isn't. Recently, Mansoura went on CNBC and was asked about a theoretical situation in which a dancer for Bad Bunny made bets about the super bowl halftime performance.

[Shane Copeland]

It sounds like that would be considered insider trading.

[Ryan Knutson]

Right.

[Shane Copeland]

So that's a great question, and it is a little bit of philosophical question. What is information and what is insider information? Right.

[Ryan Knutson]

If people can trade on Bad Bunny's super bowl halftime performance, then does Bad Bunny have an obligation to keep that information secret?

[Shane Copeland]

If he can tell people what the lineup is and that he wants to divulge that beforehand, that's fair game, and that's part of what the risk in the market is. Basically, people are buying into.

[Ryan Knutson]

Have regulators said anything about looking into this stuff?

[Kalin Ostroff]

So prior to recently, we really hadn't seen much action from regulators on this idea of insider trading on prediction markets. That changed a little bit a couple weeks ago when Jay Clayton, who's the head of the scny, the Southern District of New York department of the doj, he said that, you know, prediction markets are something that they're very much looking at and that he thinks could be an area where there's enforcement and going into the future. And so that's kind of the first inkling that we've seen that this is going to be an area where regulators are starting to look more and more at.

[Ryan Knutson]

Today, the head of the CFTC posted a video on X saying that his agency was the one to regulate prediction markets, not the states.

[Shane Copeland]

They provide useful functions for society, but.

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[Ryan Knutson]

A spokesperson for the CFTC said the agency cannot discuss enforcement measures and that investigations can take years to complete. So in the short term, at least, these kinds of prediction markets, these kinds of bets, and also the fact that insiders theoretically can make these trades, that's going to continue. What are the potential risks of that?

[Kalin Ostroff]

I mean, there's kind of twofold. So one is just if you are a normal trader and you're sitting there on the couch betting on whether the.

[Ryan Knutson]

Seahawks win or the halftime show, let's.

[Kalin Ostroff]

Say, or the halftime show, if you are a normal person betting in those, that's not really a fair market for you, right? Like you're going up against people who have more information than you. On the flip side of that, you have, you know, these markets that are more sensitive. Will Maduro be ousted, will Israel strike Iran? Those are markets that do have implications for national security. And this is information that governments keep very closely held because of the potential to have operations go wrong.

[Ryan Knutson]

Right.

[Kalin Ostroff]

And that puts lives in jeopardy and it, you know, can create all sorts of ripple effects. And so that type of information basically becoming public can be really dangerous.

[Ryan Knutson]

Another risk of these types of prediction markets is that people who are the subject of one of these bets could potentially manipulate the outcome. Kind of like an athlete betting on a game they're playing in. For instance, last October, people made bets on polymarket that the CEO of Coinbase, Brian Armstrong, would say certain words during the company's earnings call and he took notice. I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call. And I just want to add here the words Bitcoin, Ethereum, blockchain staking and web3 to make sure we get those in before the end of the call. So in that instance, Brian Armstrong could just be playing around for fun. Or theoretically he could have seen that bet, put a bunch of money down, and then decided to say what he bet on, basically, right?

[Kalin Ostroff]

Exactly.

[Ryan Knutson]

A Coinbase spokeswoman said that the company has policies to, quote, prohibit employees, including executives, from participating in prediction markets on any related confidential activity involving the company. She also said that Armstrong's remarks were made in a, quote, light hearted, offhand way.

[Kalin Ostroff]

There's all of these different ways in which you can have potential manipulation of prediction markets, and those, again, to the average person, can be really hard to see if you're a normal person. It's rife with potential for manipulation and discrepancy and it can be really hard to navigate.

[Ryan Knutson]

So what do you expect is going to happen next with these platforms?

[Kalin Ostroff]

That's a great question.

[Ryan Knutson]

Can we bet on it in Polymarket?

[Kalin Ostroff]

Polymarket does not have markets for itself yet. Maybe they'll listen this Anatom, by the.

[Ryan Knutson]

Way, Caitlyn fact checked this after we spoke and there actually have been markets about Polymarket itself.

[Kalin Ostroff]

I am interested to see what happens with this idea of the risks of insider trading. I'm interested to see whether Polymarket winds up, you know, beefing up some of the protections that it has against insider trading or user identity information that's collected. But I think we're still very young in both of these. And what I've learned from covering crypto for so many years is that all of these kind of new platforms start as these very kind of immature products that figure out how they're going to deal with regulation and manipulation and all of this stuff as they go. And so this, while being a new platform, isn't necessarily a new playbook. And regulators are going to be looking at it more and more. What they decide to do is going to inform, you know, what protections we put on these platforms going forward, if any. And so I think we're still at a really young age for this to try and figure out how this develops.

[Ryan Knutson]

One thing's for sure, these prediction markets aren't going away. In fact, more companies are launching them every day, like the investing app Robinhood and the sports betting apps DraftKing and FanDuel and even President Trump's media company announced it's launching its own prediction market that will be available on Truth Social called Truth Predict. That's all for today. Tuesday, February 17th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Alexander Osipovich and Dov Lieber. Thanks for listening. See you tomorrow.