The U.S. House Oversight Committee expanded its investigation into insider trading on prediction markets on September 29, sending formal document requests to Hyperliquid Labs, Crypto.com, and Aristotle Exchange (operator of PredictIt). All three platforms face an October 13 deadline to produce re...
"People with nonpublic information are placing bets online and taking major profits." — Rep. James Comer, Chairman, House Oversight Committee
The U.S. House Oversight Committee expanded its investigation into insider trading on prediction markets on September 29, sending formal document requests to Hyperliquid Labs, Crypto.com, and Aristotle Exchange (operator of PredictIt). All three platforms face an October 13 deadline to produce records on customer verification and suspicious-activity controls. The probe, launched in May with letters to Polymarket and Kalshi, now covers five platforms and has already yielded nearly 1,000 documents and five briefings.
The investigation follows the first-ever federal insider trading indictment on a prediction market — U.S. Army Master Sergeant Gannon Ken Van Dyke, charged in April with using classified information about Operation Absolute Resolve to earn more than $400,000 on Polymarket. A parallel Israeli prosecution indicted an air force reservist and a civilian for placing bets on IDF operations using classified intelligence. A CBS News/60 Minutes investigation identified nine connected Polymarket accounts that won $2.4 million betting on Iran war milestones with a 98% win rate.
The stakes are large. Kalshi and Polymarket combined processed approximately $53 billion in monthly volume in July 2026. Weekly volume for the week of September 21-27 reached $19.46 billion across the two platforms. The CFTC published a proposed rule on June 10 that would ban event contracts involving terrorism, assassination, and war, while permitting most sports-related contracts. Congressional Democrats have introduced separate legislation to ban prediction market gambling on elections, government activity, war, and sports altogether.
House Oversight Chairman James Comer's September 29 letters mark the second phase of an investigation that began in May 2026 with requests to Polymarket and Kalshi, the two largest prediction market operators by volume. The expansion targets three additional platforms:
Hyperliquid Labs — Comer cited reports of a $1.1 billion leveraged short position on Bitcoin and Ether perpetuals opened approximately 30 hours before President Trump's October 2025 tariff announcement. The letter requests records of customer identity verification and internal suspicious-activity reporting.
Crypto.com — The committee asked about employee trades tied to token listings and broader compliance procedures for prediction market products on the platform.
Aristotle Exchange (PredictIt) — Comer sought information on trades tied to elections, nominations, and other government actions involving current or former officials.
All platforms must respond by October 13. Records requests cover activity dating back to January 2024. The committee has received nearly 1,000 documents and five briefings from Polymarket and Kalshi since the May phase, according to the oversight committee's public release.
On April 23, 2026, the Southern District of New York unsealed an indictment charging U.S. Army Master Sergeant Gannon Ken Van Dyke — a senior enlisted special forces soldier — with insider trading violations. According to the DOJ, Van Dyke was directly involved in the planning and execution of Operation Absolute Resolve, the U.S. military operation that led to the capture of Venezuelan President Nicolás Maduro.
The alleged scheme:
The case is considered the first federal insider trading prosecution involving a prediction market, according to legal analysis by Sidley Austin LLP and Morrison Foerster.
The Van Dyke case is not isolated. Multiple investigations have identified a pattern of well-timed prediction market wagers tied to nonpublic government and military information.
Israel prosecution (February 2026): Israel indicted a civilian, identified as Omer Ziv, age 30, and an unnamed air force major in the reserves for using classified IDF information to bet on Polymarket. The duo bet on the timing of Israeli attacks during Operation Rising Lion (June 13-24, 2025) and other military actions, netting profits exceeding $100,000, according to the Times of Israel.
Iran war bets (2026): A CBS News/60 Minutes investigation found nine connected Polymarket accounts that won more than $2.4 million betting on pivotal moments in the U.S.-Israeli military campaign against Iran, including the first U.S. strikes, the removal of Iran's supreme leader, and the ceasefire announcement. The accounts had a 98% win rate across more than 80 bets. Analysts described the statistical probability of that win rate as negligible without access to nonpublic information.
Pre-announcement patterns: According to reporting by NPR and Barchart, at least 50 newly created Polymarket accounts placed substantial bets on a U.S.-Iran ceasefire in the hours — and in some cases minutes — before President Trump's public announcement. A separate anonymous account made approximately $550,000 betting on U.S. strikes against Iran before the operation began.
According to a Bloomberg investigation, more than $1 billion was staked on military decisions and outcomes on prediction markets in 2026 alone.
The prediction market sector has scaled rapidly, creating the economic incentive structure that makes insider trading attractive.
Weekly volume (Sept. 21-27, 2026):
| Platform | Volume | Week-over-Week Change | |---|---|---| | Kalshi | $15.66B | +2.6% | | Polymarket US | $2.83B | +21.0% | | Polymarket International | $964M | -13.5% | | Combined | $19.46B | +3.9% |
Monthly volume trajectory: Combined monthly trading on Kalshi and Polymarket more than doubled from $26 billion in May to $53 billion in July, according to Pew Research Center data. Sports contracts account for approximately 87% of Kalshi's volume, according to TRM Labs.
Valuations: Kalshi's valuation doubled to $11 billion in 2026. ICE/NYSE announced a strategic investment of up to $2 billion in Polymarket at an $8 billion valuation in October 2025.
Market structure: Kalshi operates as a CFTC-registered exchange. Polymarket International is domiciled offshore and claims to block U.S. users. Polymarket has separately acquired a smaller CFTC-approved exchange available to U.S. customers, creating a dual-exchange structure.
Regulators are moving on two fronts: CFTC rulemaking and Congressional legislation.
CFTC proposed rule (June 10, 2026): The Commodity Futures Trading Commission published a proposed rule establishing which event contracts can be listed on CFTC-registered exchanges. Key provisions:
Congressional legislation: Democratic Sens. Jeff Merkley (D-OR) and Elizabeth Warren (D-MA) and Rep. Jamie Raskin (D-MD) introduced legislation to ban prediction market gambling on elections, government actions, war, and sports.
Defense authorization: A draft defense bill would bar U.S. military service members and Pentagon employees from betting on prediction markets using insider information, covering even unclassified but nonpublic information such as contract awards.
White House response: The White House issued a memo stating it is a "criminal offense for anyone to use nonpublic information" on prediction markets.
The investigation has surfaced structural issues in prediction market infrastructure that differ from traditional financial markets.
Identity verification gaps: Polymarket International operates offshore and is not subject to CFTC rules. The creation of 50+ new accounts to bet on a single event — as reported in the Iran ceasefire episode — suggests identity verification on some platforms is insufficient to prevent wash trading or Sybil attacks.
On-chain pseudonymity: Crypto-native platforms settle on blockchain infrastructure where wallet addresses provide pseudonymity by default. While blockchain forensics firms like TRM Labs and Chainalysis can trace fund flows after the fact, pre-trade identification of classified-information holders is structurally difficult.
Cross-jurisdictional enforcement: The Van Dyke case (U.S.) and the Ziv case (Israel) show the problem is multinational. Polymarket's dual-exchange structure — one offshore, one CFTC-regulated — creates regulatory arbitrage opportunities.
Surveillance limitations: Traditional securities markets benefit from decades of surveillance infrastructure, including FINRA's cross-market surveillance system. Prediction markets — particularly decentralized or offshore ones — lack equivalent monitoring. The CFTC's proposed rule framework would apply only to registered exchanges.
Prediction markets have scaled from a niche financial product to a $53-billion-per-month sector in under two years. That growth brought institutional capital — NYSE invested $2 billion in Polymarket — and regulatory legitimacy through CFTC engagement. It also created a new attack surface for individuals with access to classified or nonpublic government information.
The economic incentive is straightforward: a $33,000 position yielded $400,000 in the Van Dyke case, a 12x return. The detection mechanism is lagging: the first prosecution came months after the trades, and only after military counterintelligence flagged the activity. The nine accounts identified by CBS News in the Iran war betting pattern have not been publicly charged.
The regulatory response is fragmented. The CFTC is writing rules for registered exchanges. Congress is investigating platforms it does not yet regulate. The defense authorization process is addressing military personnel specifically. None of these mechanisms addresses the underlying structural problem: on-chain prediction markets can be accessed pseudonymously from any jurisdiction, and pre-trade surveillance for classified-information holders does not exist.
The October 13 document deadline for Hyperliquid, Crypto.com, and PredictIt will determine whether the probe produces enforcement referrals or remains an information-gathering exercise. The CFTC's proposed rule comment period and the congressional legislation's path through committee will shape whether prediction markets face activity-specific bans or comprehensive regulatory restructuring.
The sector's economic trajectory and its regulatory trajectory are on a collision course. The resolution will determine whether prediction markets remain a permissionless information aggregation tool or become a regulated financial product with surveillance obligations comparable to securities exchanges.