Polymarket sanctioned “dozens” of investigations into prediction markets involving the midterm elections as an increasing number of red flags were triggered, a company official shared.
Shana Bautista, Polymarket’s head of global intelligence and investigations, told NPR that the company is keeping close tabs on its political markets ahead of the Nov. 3 voting day. This will be the first election with prediction markets available to mainstream audiences, making it an important test of security and integrity for operators across the industry.
Fighting a loss of integrity
Bautista, who joined Polymarket in June, is a former FBI official and cryptocurrency analyst. She is working with a team of 16 and a new election surveillance system to keep tabs on customer activity and identify potential sources of nefarious activity.
“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 of the “dozens” of investigations have been referred to Polymarket’s federal regulator, the Commodity Futures Trading Commission (CFTC), according to an NPR source.
There is already a precedent of illegal activity in place. In April, prediction leader Kalshi banned and fined several political candidates who were found to have purchased event contracts involving their campaign races. NPR reported a month later that campaign staffers had made “thousands” using inside information at prediction markets offered by Polymarket and PredictIt.
Bautista’s goal is to nip that illicit activity in the bud. She’s in charge of overseeing the security of both Polymarket US and Polymarket International, which is not licensed in America and accepts cryptocurrency payment.
But despite the general belief that crypto trading is anonymous, Bautista warned that transactions can still be traced to specific individuals. Her election surveillance system uses "gigabytes" of data from social media, the Federal Election Commission, crypto and banking companies, and additional sources. Individuals who trigger a minimum number of red flags prompt an alert that is sent to Bautista’s phone.
“There's never been a case that we work where we haven't been able to identify, potentially, who these people are,” she said. “We’re getting hundreds of alerts a day.”
Midterm elections testing prediction market security
Bautista was not willing to provide many details about the exact set-up of Polymarket’s surveillance system it is using to preserve midterm election prediction markets. However, she noted that illegal trading and manipulation have the same characteristics, regardless of market.
“We're looking at threat vectors and risk areas that have existed for decades in traditional markets,” Bautista said. “But 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.”
Prediction markets aren’t a perfect science. Just because an outcome — in the case of elections, a candidate’s campaign — is trending in a positive direction does not mean that they have to win. That said, prediction markets gained notoriety during the 2024 Presidential Election for being among the first platforms to predict President Donald Trump’s return to the White House, while many polls still ruled the race with Kamala Harris as a pick’em.
Bautista said that Polymarket is using past examples to understand how would-be manipulators might evolve their tactics moving forward.
“If I was worried about somebody trying to materially move an election market to make it look like one option was more likely to happen than the other and I identify a pattern where they're opening several different accounts and they're doing that in short bursts and I see device IDs consistent across different trades placed in short succession with new wallets across five or four different accounts,” she said. “If I were to work that case and then action that, the findings of that tactic go back into the process to create the detections.”
The Trade Handle Prediction Markets Take
The overwhelming growth of prediction markets has required companies to invest in integrity protection, especially ahead of the midterm elections. Hundreds of millions of dollars have already been traded on House, Senate, and gubernatorial races that will be decided next week in what is a huge opportunity for prediction companies to officially stake themselves as the leading source of information during election season, if their market data can outperform polling information.