Washington, D.C. — The explosive growth of online prediction markets has created a dangerous new opportunity for government insiders to profit from classified information and policy decisions that may undermine national security, according to a new analysis from the Center for American Progress.
Monthly prediction market trading surged from less than $5 billion in September 2025 to roughly $24 billion by April 2026, while suspicious bets placed ahead of major U.S. military operations expose significant national security and ethics risks. The analysis recommends banning federal officials and employees (including members of the military) from participating in prediction markets, requiring identity verification for all users, strengthening insider trading laws, and taking immediate executive action to protect classified information.
“The people entrusted with America’s most sensitive information should be protecting it, not profiting from it,” said Alexandra Thornton, senior director of financial regulation at CAP and co-author of the issue brief. “When government insiders can bet on military operations or other confidential actions, it creates conflicts of interest that threaten national security and erode public trust. Congress should close these loopholes before another insider turns classified information into personal profit.”
Among the findings and recommendations:
- Prediction markets are booming. Trading on the two largest platforms, Polymarket and Kalshi, grew from less than $5 billion in September 2025 to about $24 billion in April 2026, while first-quarter 2026 trading exceeded the total volume for all of 2025 by roughly 40 percent.
- Suspicious betting has coincided with sensitive national security events. Federal prosecutors allege a U.S. Army special operations soldier used classified information about the operation to capture Venezuelan President Nicolás Maduro to inform bets that turned roughly $33,000 into more than $400,000. Additional anonymous accounts reportedly earned about $1 million betting ahead of U.S. strikes on Iran, while another account profited $48,500 after betting minutes before President Donald Trump announced a ceasefire.
- Existing federal insider trading laws do not clearly cover prediction markets. The analysis finds that legal ambiguity has left regulators without clear authority to police insider betting on these platforms.
- Anonymous trading makes abuse harder to detect. Many platforms allow users to place large wagers under pseudonyms with limited transparency, making it significantly more difficult to identify government insiders trading on confidential information.
- Congress and the executive branch have tools to act now. The analysis recommends banning federal officials and employees, military personnel, and cleared contractors from prediction markets; requiring identity verification for bettors; strengthening the STOCK Act; and updating executive branch ethics rules.
Read the analysis: “Government Insiders Must Be Prevented From Profiting on Prediction Markets at the Expense of National Security” by Alexandra Thornton, Devon Ombres, and Allison McManus
For more information on this topic or to speak with an expert, please contact Christian Unkenholz at [email protected].