CFTC deploys AI and blockchain tools to hunt insider trading on Polymarket
Chairman Michael Selig confirms the agency is pursuing hundreds of tips and using third-party surveillance to enforce Dodd-Frank Act provisions against market manipulation.
The US Commodity Futures Trading Commission is intensifying its enforcement actions against insider trading on offshore prediction markets, specifically targeting platforms such as Polymarket. Chairman Michael Selig confirmed that the agency is actively surveilling US traders who utilise virtual private networks to bypass geographic restrictions and access these crypto-based platforms. The regulator is prepared to exercise extraterritorial jurisdiction under the Dodd-Frank Act to pursue these cases.
To manage the growing volume of data and handle increasing workloads, the CFTC is staffing up and leveraging automation. Selig told WIRED that the agency is feeding trading data into artificial intelligence tools to analyse patterns and flag potential manipulation. These proprietary systems help investigators determine where to focus their efforts and when to issue subpoenas to traders suspected of illegal activity.
The agency’s surveillance arsenal includes third-party blockchain tracing tools such as Chainalysis for crypto platforms and market abuse detection software like Nasdaq Smarts for centralized markets. While Selig declined to specify other proprietary AI tools used by the commission, he emphasised that the technology provides critical insights into where investigations should be directed.
This regulatory crackdown follows significant political scrutiny and the arrest of a US Army special forces soldier on 23 April. The soldier was charged with trades linked to the capture of former Venezuelan leader Nicolas Maduro, an incident Polymarket stated it had flagged to authorities. The enforcement drive also responds to concerns raised by Senator Chris Murphy and seven other members of Congress regarding war-related contracts and morally obscene trades on military action.
Selig stated that the agency is pursuing hundreds, if not thousands, of insider trading tips. The CFTC will exert extraterritorial jurisdiction on a case-by-case basis, particularly in extreme circumstances where charges have a strong chance of sticking in court. The regulator also noted that it refers cases to foreign regulators when it lacks jurisdiction or when litigation challenges could impair future enforcement capabilities.
Meanwhile, prediction market operators are enhancing their own compliance measures. Polymarket recently announced partnerships with Palantir for its US-based sports markets and with Chainalysis for its offshore platform to combat market manipulation. Its primary competitor, Kalshi, has also suspended and penalised customers flagged for insider trading and market abuse.
