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

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.

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]

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]

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]

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]

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]

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]

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

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.

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.