Polymarket Probes Dozens of Midterm Election Bets

Polymarket has reviewed dozens of bets tied to the midterm elections, the company's head of global intelligence and investigations, Shana Bautista, said. Her team of 16 and a new surveillance system are policing those bets ahead of the Nov. 3 midterms. At least two of these investigations have been referred to the U.S. Commodity Futures Trading Commission, according to a person familiar with the probes who was not authorized to speak publicly about them.

Bautista joined Polymarket in June. She previously worked as an FBI official and cryptocurrency analyst. She oversees data gathered from the U.S.-regulated version of Polymarket, which requires real identities, and Polymarket International, where trading can be anonymous and paid in cryptocurrency. The company's system pulls gigabytes of data on each user from social media, Federal Election Commission filings, cryptocurrency companies, banking partners, statistical models and other public records. When a user crosses a set number of internal red flags, Bautista gets an alert on her phone. "We're getting hundreds of alerts a day," she said.

Bautista declined to describe the specific detection criteria, citing system security. She said insider trading and market manipulation look alike across financial markets. "We're looking at threat vectors and risk areas that have existed for decades in traditional markets," Bautista said. "We recognize, too, that when it comes to prediction markets, we're seeing some of the old tried and known tactics, but being applied to a new vector through prediction markets." She also said crypto trades are rarely fully anonymous. "There's never been a case that we work where we haven't been able to identify, potentially, who these people are," Bautista said.

Rajiv Sethi, an economics professor at Barnard College at Columbia University who has studied prediction markets for decades, said election markets carry a specific risk. "[Election prediction markets] have the possibility of being a self-fulfilling prophecy," Sethi said. "Elections have the property that what one believes is going to happen can actually affect what happens if a candidate is thought to be losing momentum or the campaign is flagging."

Kalshi, Polymarket's top rival, announced its own election surveillance system in May that also uses FEC data. The company said its system blocks campaign staffers listed by the FEC from betting on an election. In July, Kalshi said it had blocked dozens of staffers from trading on elections. In April, Kalshi banned and fined a handful of political candidates from betting on themselves. The U.S. Commodity Futures Trading Commission has largely left policing of these markets to the companies themselves.