I noticed an interesting pattern in prediction markets that is becoming increasingly problematic. An incident on Polymarket clearly demonstrates why regulators have started paying attention to insiders in the crypto ecosystem.

Six accounts placed bets on the U.S. strike against Iran on February 28 and made about $1.2 million. Blockchain analysts from Bubblemaps tracked that these wallets were funded literally within 24 hours before the event, and then took positions just a few hours before news of the explosions. After that, the accounts just froze — no other activity. One of them bought over 560,000 shares at $0.108 and earned nearly $560,000 when the market closed at $1.

This is not the first case. On the competing platform Kalshi, users have already been suspended and fined for similar activities. The situation with MrBeast’s show employee, who traded based on inside information, is especially amusing. Kalshi conducted around 200 investigations and is currently handling more than a dozen active probes. One trader was disqualified for two years and fined over $20,000.

An even more wild example happened recently. When blockchain expert ZachXBT hinted that he was preparing an investigation into a certain crypto platform, Polymarket immediately created a contract where users had to guess which company was under investigation. It turned out that 12 wallets were actively betting on the correct answer even before the results were published. It appears insiders were trading even on a market created specifically to catch insiders.

The Commodity Futures Trading Commission issued a warning that such activity could violate U.S. law. The chairperson called exchanges the first line of defense. It’s clear that regulators are taking this seriously.

While all this is being sorted out, markets continue to react to events. After the February attacks, Bitcoin’s price dropped, and oil futures rose. Currently, Bitcoin is holding in the $74,000 range, trying to break above $76,000, but so far unsuccessful. Funding rates for perpetual contracts have remained negative for 46 days, indicating bearish sentiment despite rising open interest.

This situation shows that prediction markets are not just entertainment. When hundreds of millions are involved, people are willing to use informational advantages. Regulators are forced to restore order, but the game of catch-up has only just begun.