I love prediction markets. They’ve challenged the idea of Vegas running sports betting and always taking a hefty commission. They’ve provided statistically significant predictors of political campaign successes and pop culture developments. But I don’t love prediction markets for any of those reasons. To me, they’re one of those things that I’m going to look back on in 50 years and be grateful I was around for just because of how chaotic and unprecedented they are/were. The opportunity to bet on literally anything is something that I don’t think we’ve truly appreciated. Even sports betting was remanded to the backrooms of bars until the past decade or so, and now the NBA shoves ads for it down our throats every game.
But the Wild West days of Polymarket might be coming to an end. This week, Gannon Ken Van Dyke, a U.S. Special Forces soldier, was arraigned in a federal court in New York on charges of fraud related to alleged Polymarket bets on Venezuelan President Nicolas Maduro’s January capture. According to the government, he won over $400,000 by placing $33,943 on Maduro’s ouster days before the operation. The government isn’t charging him with insider trading — rather, it’s charging him with misuse of classified information to turn a profit. Which pretty much sounds like insider trading.
But this raises a larger issue: What qualifies as material non-public information on a site that bets on reality? Take, for instance, the guy that recently (allegedly) used a hair dryer on a Paris weather sensor to make $35,000 on Polymarket by spiking the high temperature. (Side note: yes, you can bet on the weather there too.) He did affect reality, I guess, by changing the high temperature, at least in the six-inch vicinity of the weather sensor, but is that truly cheating? The bets did settle, but Polymarket changed its French weather source to a more secure sensor — more importantly, French police are going after the guy, so that $35,000 will probably go to legal fees.
The larger issue I’m getting at is probably more relevant with the Special Forces soldier: Imagine Polymarket was around during the Osama bin Laden raid. I’m sure more than one Navy SEAL would have taken a moment in the helicopter to throw at least 20 bucks on bin Laden’s death. Then extend that to drone operators, CIA analysts and even politicians. If this guy on the Maduro operation can make it work, I’m sure there are people up the chain who might be able to make bets a little more discreetly with multiple wallets and crypto funds more secure than Coinbase accounts. If so, what happens when we give people who have the power to change global dynamics an incentive to make incredibly volatile things happen? The Maduro ouster odds were literally <1% in the hours before the raid. Volatile events make the most money on Polymarket, so it might be enticing for a missile controller to break a treaty or two in the name of 100x-ing his kid’s college fund.
I guess the Polymarket party isn’t really over. Yet. Right now the site exists in a weird legal gray area with the FTC, which is why you need a VPN and crypto access to make any bets within U.S. borders. Until proper regulation happens, which is probably going to happen soon once the government realizes the tax opportunities that regulating sites like Kalshi have provided, as long as you don’t trade on classified information you’re probably in the clear.
I’d like to round this off by making a little prediction market of my own that we can all look back on long after this gets published. Are prediction markets here to stay, and if so, will they be fully adopted by entities like the Intercontinental Exchange (which has already made a huge investment in the prediction market industry), or will they keep their semi-niche user base of crypto bros on X monitoring the situation? I don’t know what the odds of any of this happening are, but there’s probably a contract for it on Polymarket.
