'Insider' Wallets Reap Millions on Investigations
The prediction market sector is facing a wave of scrutiny this weekend following multiple high-profile allegations of insider trading across major platforms. In the most significant development, suspected insider wallets on Polymarket reportedly generated over $1.2 million in profits by betting on the outcome of an investigation by crypto sleuth ZachXBT before it was made public.
According to data analyzed by Cointelegraph, the top eight wallets betting on the "Axiom exposé" market captured the bulk of these gains. The market, ironically designed to leverage crowd wisdom to uncover bad actors, appears to have been exploited by those with advanced knowledge of the findings. CoinDesk reports that one specific trader managed to turn a $0.14 average entry on shares into a staggering $411,000 profit, fueling concerns among blockchain researchers regarding market integrity.
MrBeast Editor Suspended Amid Kalshi Probe
The controversy is not limited to crypto-native platforms. In a separate incident involving the regulated exchange Kalshi, Beast Industries has suspended a video editor pending an internal investigation into alleged insider trading. As reported by Decrypt, Beast Industries CEO Jeff Housenbold confirmed the suspension on Thursday.
This follows a broader crackdown by the platform; earlier in the week, Kalshi banned a US politician and a YouTuber for similar alleged violations. The CFTC has signaled it is watching closely, with Chair Mike Selig warning that the agency has established an advisory specifically to catch insider traders in these markets.
Coinbase Defends Markets Against State Bans
While platforms battle internal integrity issues, the industry is also fighting external legal threats. Ryan VanGrack, Coinbase’s head of litigation, issued a sharp rebuke against state regulators on Friday. VanGrack argued that certain states are "gaslighting" the public by misrepresenting federal law in their efforts to block prediction markets, according to CoinDesk. This comes as several states attempt to impose localized bans despite federal approvals for platforms like Kalshi.
Despite the regulatory and ethical turbulence, traders remain active. While the broader crypto market is experiencing "extreme fear," Decrypt notes that prediction market users are signaling optimism for near-term Bitcoin and Ethereum price moves. As scrutiny mounts, traders utilizing prediction market tools to track volume and sentiment are becoming increasingly vigilant about distinguishing between organic crowd wisdom and insider manipulation.