Polymarket probes dozens of election bets

Polymarket has investigated dozens of bets related to the upcoming midterm election, according to Shana Bautista, the company's head of global intelligence and investigations.

The prediction market platform, along with rival Kalshi, has seen a surge in popularity over the past year. This growth has coincided with legal challenges from states and political pushback from lawmakers who argue that betting on election outcomes poses risks to the democratic process.

Bautista, who joined Polymarket in June, oversees a team of 16 employees tasked with policing election bets. She previously served as an FBI official and a cryptocurrency analyst. Her role involves monitoring both the U.S.-regulated version of Polymarket, which requires real identities, and Polymarket International, where trades can be conducted anonymously with cryptocurrency.

The company has implemented a new election surveillance system that aggregates gigabytes of data for each user. This data includes information from social media, the Federal Election Commission, cryptocurrency companies, banking partners, and statistical models. Bautista reported that her team receives hundreds of alerts daily when users trigger specific red flags.

Bautista stated that insider trading and market manipulation in prediction markets follow patterns similar to those in traditional financial markets. She noted that while tactics are old, they are being applied to a new vector. "If you have information that you have a duty to protect, don't trade on it," Bautista said. "It's explicitly against our terms of use on both platforms, but also is against the law. If you decide that you are smarter and can do it, we will find you."

At least two Polymarket investigations have been referred to the U.S. Commodity Futures Trading Commission, the federal regulator for these markets, according to a person familiar with the probes. The CFTC has largely left the work of policing these new financial markets to the companies themselves as the industry expands.

Competitor Kalshi announced its own election surveillance system in May, which blocks campaign staffers listed by the FEC from betting on elections. In July, Kalshi reported blocking dozens of staffers from trading, though at least one staffer told NPR they worked around the system. Rajiv Sethi, an economics professor at Barnard College at Columbia University, noted that election prediction markets have the possibility of being a self-fulfilling prophecy because beliefs about a candidate's momentum can affect actual results.