Prediction Market Compliance: Detecting On-Chain Insider Trading and Oracle Risks
Updated: Oct 7
Prediction and event markets have moved into the mainstream financial system. Industry reporting puts weekly trading volume above $2 billion, monthly volume on Kalshi above $1.3 billion, and total 2025 trades across the sector at about $12 billion.
As these platforms grow, regulatory attention is growing with them, and more operators are adopting regulation-first models:
Kalshi is registered with the CFTC as a Designated Contract Market, which brings KYC and AML obligations.
Polymarket is building U.S. compliance infrastructure under Polymarket US (QCX LLC), following a reported $112 million acquisition of QCX and an Amended Order of Designation from the CFTC in November 2025.
Robinhood has said its prediction market business generates about $300 million in annual revenue, and it acquired MIAXdx to list and clear its own event contracts.
Crypto.com launched a standalone prediction platform, OG, in February 2025.
Newer platforms such as Opinion Trade, SX Bet, DraftKings and FanDuel face the same compliance questions.
For compliance officers, sponsor banks and regulators, the takeaway is that platforms moving into regulated markets need market-integrity controls built for event contracts. Standard transaction monitoring was not designed for the multi-chain risks these products create.
Three Compliance Risks in Prediction Markets
1. On-chain insider trading and manipulation
In traditional equities, insider trading runs through identifiable accounts. Prediction markets let pseudonymous wallets bet directly on real-world outcomes. Standard AML screening flags sanctioned or tainted funds; it does not show when clean, exchange-funded wallets trade on non-public information. Press reports in 2025 and 2026 described investigations into bets placed shortly before military and political events, which shows the risk is not theoretical.
Without monitoring of transaction timing and wallet relationships, a platform has little visibility into this kind of activity.
2. Oracle errors and engineered outcomes
Prediction markets settle when a smart contract receives data from a designated feed, or oracle. If that feed is wrong or manipulated, contracts can settle incorrectly. In November 2025, a contract reportedly settled on a report about the war in Ukraine that was later disputed, paying out to one side of the market.
If bad actors can influence an oracle, they can influence how markets resolve, which creates fraud and money-laundering risk.
3. Geofencing evasion and jurisdictional risk
Event contract platforms operate under local gambling, consumer protection and AML rules. Many block users from restricted jurisdictions, but determined traders get around these blocks with VPNs and pseudonymous wallets. Platforms need to show regulators a good-faith, technically sound effort to connect wallet activity with real locations.
How ComplyChain Can Help
ComplyChain Solutions combines AML and KYC advisory with blockchain investigations, supported by our CoinForensics platform. For prediction market operators and their banking partners, that can include:
Insider trading reviews: analysis of wallets that took large positions shortly before a resolution event, including funding sources, shared clustering signals and links to exchange accounts, documented for your compliance team and counsel.
Oracle and settlement reviews: checking how disputed contracts were resolved against the underlying public sources.
Position aggregation: identifying wallets that appear to share funding and timing patterns, for platforms subject to position limits.
Geofencing checks: comparing on-chain activity with KYC-declared locations to find high-risk mismatches.
Program design and review: market-integrity, AML and KYC controls written for event contracts.
Decisions on whether and what to report to regulators stay with your compliance officer and counsel. Our role is to give them clear, documented findings.
Talk to us
To discuss a review or a program assessment, email info@complychainsolutions.com.
