Polymarket trade on Maduro exit triggers federal bill on insider trading safeguards

On the first weekend of 2026, a trader on a prominent prediction market made a six-figure profit on the US capture of Venezuela President Nicolas Maduro. It raised fresh questions on the safeguards required to mitigate the risks of insider trading on the markets.

The unidentified trader on Polymarket invested more than $34,000 on a series of event contracts predicting Maduro would be ousted by 31 January, an outcome that initially carried enormous odds. In total, the trader generated a return of $436,759.61, earning at least a 12-fold profit. According to Polymarket data, the trader first invested in the contract on 27 December before steadily increasing the trades on Maduro’s removal.

Although there is no conclusive evidence that insider trading was involved, the user only appeared to open an account at some point last month, the data indicates. The final trade, with a probability below 10%, apparently occurred mere hours before US special forces removed Maduro from a fortified compound in Caracas.

Now, a Democratic congressman from New York has introduced a bill that aims to prohibit insider trading across prediction markets, a rapidly expanding asset class. The Maduro-related trades triggered the announcement from US Rep Ritchie Torres, iGB has learned.

Explaining the bill

A two-term congressman from the Bronx, Torres introduced the Public Integrity in Financial Prediction Markets Act on Monday. The bill would make it unlawful for a so-called “covered individual” to engage in a financial transaction if they possess information related to the trade that is not readily available to the public. The concise three-page bill defines a covered individual as a political appointee, an elected official of the federal government or an employee of an executive agency.

Two media outlets, The New York Times and the Washington Post, received leaks about the plan to remove Maduro from Venezuela before the military raid took place. The newspapers withheld any prior reporting to protect the safety of US soldiers involved in the mission.

When reached by iGB, a spokesman for Torres said that while the Maduro-related market activity triggered announcement of the legislation, the congressman’s office had previously researched the broader issue for quite some time. In recent months, the dissemination of “material non-public information for financial gain” has received considerable attention in light of an NBA sports betting scandal. If the Polymarket trader made a transaction using similar non-public information, that type of activity would be captured in the bill as a crime, the spokesman added.

Integrity concerns

As prediction market activity proliferates, the battle between federalism and states’ rights continues to intensify in regard to the regulation of the new asset class. The regulation of event contracts on prediction markets was a focus at two conferences last year held by an organisation of state legislators.

On the federal level, the regulation of financial derivatives traded on prediction markets falls within the purview of the US Commodity Futures Trading Commission. Last July, attorneys exchanged fireworks discussing the regulatory treatment of sports event contracts at the National Council of Legislators from Gaming States meeting in Louisville. One rule that pertains to event contracts, CFTC regulation 40.11, authorises the CFTC to ban contracts if they are contrary to the public interest, such as in the following examples:

1. activity that is unlawful under any federal or state law;
2. terrorism;
3. assassination;
4. war;
5. gaming;
6. other similar activity determined by the commission, by rule or regulation, to be contrary to the public interest. 

Although an argument can be made that a contract on whether Maduro would be removed from power represents a violation of the regulation, a contrarian view holds that the trade is comparable to those on election markets.

Months after the NCLGS Louisville event, a panel at its December meeting in Puerto Rico delved into the potential perils of market manipulation of prediction markets. NCLGS President Shawn Fluharty told iGB on Monday that the CFTC is fundamentally a “post-enforcement agency”, before he added that the commission does not mandate real-time integrity monitoring, a standard that persists in numerous states where legal sports betting is regulated.

“If it is proven that a Polymarket whale traded on material non-public information, the problem isn’t just enforcement after the fact, it’s the lack of a regulatory framework designed to prevent the behaviour in the first place,” Fluharty told iGB.

More trades on Venezuela politics

Conversely, some prediction market backers argue that indicators of insider trading may provide a harbinger of a major news event, resulting in a net positive for market observers. Alex Nowrasteh, senior vice president of policy at the Cato Institute, wrote on X that the prediction market activity creates a “social good”, pointing to the increased liquidity on the Maduro market before the raid.

During his Senate confirmation hearing last November, new CFTC Chairman Michael Selig said it is vital that the commission ensures that the contracts are not “susceptible to manipulation”, then added that he will enforce such prevention.

Weeks before the capture of Maduro, Polymarket CEO Shayne Coplan spoke to 60 Minutes for a piece on the company’s rapid ascent. At the time of the interview, a market on whether Maduro would be out of power by the end of 2025 generated trading volume of approximately $3.6 million.

“If you are into geopolitics, this creates an incentive for you to dig in to what’s going on in Venezuela and try and get an edge,” Coplan said.

While 60 Minutes reporter Anderson Cooper noted that the possibility of trading on Maduro’s removal could be “compelling”, he did not ask Coplan about the potential insider trading implications.

As of Tuesday, Polymarket offered more than three dozen event contracts on the political environment in the South American nation. On Tuesday afternoon, the “yes” option for whether the US will invade Venezuela by 31 March traded for 14 cents (a $100 trade will pay $714.29).

A Polymarket spokesperson did not immediately respond to a request from iGB for comment.

Proposed trading restrictions on members of Congress

Kalshi, a rival of Polymarket, also offers markets on geopolitical issues related to Venezuela. On Kalshi, Venezuela interim President Delcy Rodriguez, Maduro’s successor, is the favourite to lead the nation by the end of 2026. But users can enter a stake on whether Maduro will regain the presidency or if Trump will lead Venezuela, at 6 cents and 4 cents, respectively.

Kalshi also offers a separate event contract on whether members of Congress will be banned from trading stocks. The 2012 Stop Trading on Congressional Knowledge Act prohibits lawmakers from making stock trades when they are privy to material non-public information. Members of Congress are not banned outright, however, from maintaining a portfolio of stocks.

It is unclear if committing an unlawful act of insider trading under Torres’ bill would result in criminal charges against the offender. A congressional member or spouse who violates the 2012 law may be subject to a fine of up to $50,000 for each violation.

In the wake of Maduro’s ouster, an executive from a progressive activism group opined on the ethical implications of profiting from foreign policy decisions. Sean Vitka, executive director of Demand Progress, told Prospect.org that trades on military action could be vulnerable to manipulation, especially when the executive branch conducts activity without approval from Congress.

“Of course insiders shouldn’t be able to get rich off of policy decisions – but even more concerning is the possibility that people are skewing policy outcomes in order to make their bets pay off,” Vitka said.