The Commodity Futures Trading Commission will pursue US traders who use virtual private networks to place bets on blocked offshore prediction markets, chairman Michael Selig told WIRED on May 16. The agency is deploying AI-driven surveillance and blockchain tracing tools to identify manipulators. “We’re going to find them, and we’re going to bring actions,” Selig said.
Selig spoke from the CFTC’s headquarters in Washington, DC. The agency is lean, he acknowledged. It is staffing up.
New hires are not the only answer. The CFTC is turning to automation to handle a growing caseload of suspicious trades on platforms like Polymarket, a crypto-based prediction market blocked inside the United States. “You’ve got so much data,” Selig told WIRED. “When we feed it into AI, we get really great information. It can help us understand things, like where we might want to investigate, or when we might need to send a subpoena to a trader.”
The agency’s toolkit includes proprietary systems built in-house. It also uses third-party software: Chainalysis for tracing crypto transactions and Nasdaq Smarts for monitoring centralized markets. The CFTC declined to name other AI tools it has deployed.
Polymarket has spent the past year in the spotlight. Traders made fortunes on contracts tied to geopolitical shocks — the raid on Venezuela, the Iran War. The timing of some bets raised flags.
Polymarket operates offshore. It is not licensed in the United States. That technicality did not stop US-based users from accessing the platform through VPNs.
Selig says the CFTC is watching anyway. “We’re surveilling the markets on a global basis,” he told WIRED. Extraterritorial enforcement is on the table. Selig described a case-by-case approach, one that weighs the odds of a prosecution surviving a court challenge.
The 2010 Dodd-Frank Act gives the CFTC more authority over foreign swap activities that impact the United States, he noted. When a case falls outside that reach, the agency refers it to foreign regulators. “We’re constantly referring cases,” Selig said. The agency would not specify which ones.
One case has already landed. On April 23, federal agents arrested a US Army special forces soldier. The charge: insider trading on Polymarket contracts tied to the capture of former Venezuelan leader Nicolas Maduro.
Polymarket later claimed it had flagged the trade to the government. That arrest is the only one so far. Selig insists it will not be the last.
The agency will pursue wrongdoers, he said, no matter “how large or how small.”
Prediction market companies are scrambling to show they are cleaning house. Kalshi, the US-based rival to Polymarket, announced it has suspended and penalized customers for insider trading and market manipulation. Polymarket itself changed course this spring after significant backlash.
The company updated its market integrity rules. It struck a deal with Chainalysis for its offshore platform and partnered with Palantir for its US-based sports markets. Polymarket CEO Shayne Coplan had previously argued insider trading could be good for prediction markets.
That argument is gone. The company did not respond to WIRED’s request for comment. Chainalysis spokesperson Maddie Kenney described the company’s role in neutral terms. “The value Chainalysis adds for our customers, including Polymarket and the CFTC, is organizing the data and enriching it with the attributions and insights we’ve accumulated over years in the space,” she said.
The CFTC’s push comes under political pressure. In March, Connecticut senator Chris Murphy told WIRED he suspected White House staffers were trading on war-related contracts. In early April, seven members of Congress sent a letter to the CFTC demanding an investigation into overseas markets offering war-themed event contracts.
The lawmakers called such trades “morally obscene.” Selig recently told Congress the agency is pursuing “hundreds, if not thousands” of insider trading tips. Here is what they are not telling you. The CFTC’s extraterritorial reach is legally fragile.
Selig admitted as much. “In any extraterritorial litigation, there’s going to be challenges to our authority, and that could also impair our ability to bring cases in the future,” he said. The agency is picking its fights carefully, choosing cases with a strong chance of sticking. The math does not add up for a broad crackdown.
A single arrest in a year of rampant suspicious trading suggests the gap between rhetoric and enforcement remains wide. Follow the leverage, not the rhetoric. The CFTC’s real power lies in its surveillance infrastructure, not its courtroom wins.
The agency is building a system that can trace crypto transactions across blockchains, identify trading patterns, and flag anomalies at scale. That data can be shared with foreign regulators even when US courts cannot touch a case. The deterrent effect is the play, not mass prosecution.
Prediction markets are not going away. Polymarket and Kalshi have drawn millions of users and billions in trading volume. The contracts cover elections, wars, economic indicators, and celebrity trials.
The line between gambling and information markets has blurred. Regulators are now racing to catch up. Why It Matters:
The CFTC’s enforcement posture will shape whether prediction markets become a legitimate financial tool or a vector for insider trading on a global scale. If the agency can successfully prosecute even a handful of high-profile cases, it sets a precedent that US law reaches offshore crypto platforms. If courts reject extraterritorial claims, the deterrent collapses.
The outcome affects not just Polymarket traders but the broader question of whether any crypto-based market can operate beyond the reach of national regulators. Key Takeaways: - The CFTC is using AI and blockchain tracing tools to identify US traders using VPNs to access blocked offshore prediction markets like Polymarket. - Only one person has been charged so far — a US Army soldier arrested in April for trades on the capture of Nicolas Maduro. - Polymarket and Kalshi have both announced new partnerships and rule changes aimed at catching insider trading, reversing earlier permissive stances. What comes next will be defined by the courts.
Selig is betting that Dodd-Frank gives the CFTC enough reach to survive legal challenges. A single ruling against the agency could gut that authority. Watch for new arrests in the coming months — Selig has promised them.
Watch also for whether Congress moves to give the CFTC explicit new powers over offshore prediction markets. The lawmakers who called war contracts “morally obscene” are unlikely to drop the issue. The next arrest will signal whether the CFTC’s global surveillance posture is a genuine enforcement campaign or a bluff with a single soldier as its only proof.
Key Takeaways
— - The CFTC is using AI and blockchain tracing tools to identify US traders using VPNs to access blocked offshore prediction markets like Polymarket.
— - Only one person has been charged so far — a US Army soldier arrested in April for trades on the capture of Nicolas Maduro.
— - Polymarket and Kalshi have both announced new partnerships and rule changes aimed at catching insider trading, reversing earlier permissive stances.
— - The CFTC's extraterritorial authority is legally untested and the agency is choosing cases carefully to avoid court losses that could weaken future enforcement.
Source: WIRED
