CFTC deploys AI and blockchain tools to root out prediction market insider trading
Chairman Michael Selig confirms the agency is pursuing hundreds of tips and prepared to exercise extraterritorial jurisdiction under the Dodd-Frank Act to prosecute suspicious activity on platforms such as Polymarket.
The US Commodity Futures Trading Commission (CFTC) is intensifying its enforcement capabilities against insider trading on offshore prediction markets, deploying artificial intelligence and blockchain tracing tools to identify suspicious activity. Chairman Michael Selig confirmed the agency is actively surveilling US traders who utilise virtual private networks to access foreign platforms like Polymarket, which is blocked within the United States.
Selig stated that the commission is preparing to exercise extraterritorial jurisdiction under the Dodd-Frank Act to pursue enforcement actions against individuals engaging in misconduct on these overseas exchanges. The agency’s approach is described as case-by-case, with Selig noting that extraterritorial litigation would be reserved for extreme circumstances where charges have a high probability of succeeding in court.
To manage the growing volume of data, the CFTC is leveraging automation, including proprietary in-house surveillance systems and third-party tools such as Chainalysis for crypto platforms and Nasdaq Smarts for centralized markets. Selig told WIRED that the agency is pursuing hundreds, if not thousands, of insider trading tips and relies on AI to analyse trading patterns and determine where subpoenas or further investigations are warranted.
This regulatory push follows heightened congressional scrutiny and the recent arrest of a US Army special forces soldier for trades linked to geopolitical events, including the capture of former Venezuelan leader Nicolas Maduro. Senator Chris Murphy and seven other lawmakers have raised concerns about suspected insider trading by White House staffers on war-themed event contracts, describing some trades as morally obscene and urging the CFTC to investigate.
In response to the regulatory pressure, prediction market operators have tightened their own controls. Polymarket has updated its market integrity rules and announced partnerships with Chainalysis for its offshore platform and Palantir for its US-based sports markets. Meanwhile, US-based competitor Kalshi announced it has suspended and penalised customers flagged for insider trading and market manipulation.
The CFTC is also collaborating with international counterparts, referring cases that fall outside its primary jurisdiction or where legal outcomes are uncertain to foreign regulators. Selig insisted that the agency is only beginning its enforcement drive and intends to identify wrongdoers regardless of their size or prominence.
