Polymarket builds detections around election-market manipulation tactics

In April, Kalshi banned and fined three political candidates; lawmakers sought prediction-market laws

In an Oct. 27 statement, Shana Bautista, head of Global Intelligence & Investigations at Polymarket, said the company builds detections around how someone would actually try to manipulate an election market and what that activity would leave behind. Bautista, a former FBI official and cryptocurrency analyst, told NPR that her team and a new election surveillance system are policing election bets ahead of the Nov. 3 midterms.

“We build detections around how someone would actually try to manipulate an election market and what that activity would leave behind,” Bautista said in a statement. “Our team brings years of experience tracing funds and investigating sophisticated networks. We connect the evidence, evaluate legitimate explanations and document the basis for our decisions.”

Polymarket said it had investigated bets related to the upcoming midterm elections. NPR reported that at least two of those investigations were sent to the U.S. Commodity Futures Trading Commission.

Bautista said trading on protected information violates platform terms of use and the law. “If you have information that you have a duty to protect, don’t trade on it,” she 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.”

She would not comment on specific detection criteria or methods. Bautista said insider trading and market manipulation all look the same regardless of the market. “We’re looking at threat vectors and risk areas that have existed for decades in traditional markets,” she 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.”

In a hypothetical case, Bautista described how investigators might recognize an attempt to materially move an election market. “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.

Bautista said findings from cases aid future investigations. “If I was to work that case and then action that, the findings of that tactic go back into the process to create the detections.”

In April, Polymarket competitor Kalshi banned and fined three political candidates from betting on themselves.

Prediction markets have become increasingly popular, and regulators and lawmakers are scrambling to enact laws to control them.

Election prediction markets are uniquely vulnerable to market manipulation and insider trading, Rajiv Sethi, an economics professor at Barnard College at Columbia University, told NPR. “[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.”