Financial Regulation and Enforcement

Israeli authorities say they have arrested several people and formally charged a civilian and a military reservist on suspicion of using classified military information to place bets on the crypto prediction platform Polymarket. Prosecutors in Tel Aviv announced Thursday that the two have been indicted for bribery and obstruction of justice, and that others are under investigation for Polymarket wagers allegedly based on secret intelligence, including bets on a June 2025 Israeli strike on Iran during a 12‑day war. The case is the first publicly known instance of criminal charges over prediction‑market bets made with military secrets and follows earlier scrutiny of a Polymarket trader who turned a $32,000 wager on the U.S. capture of Venezuela’s Nicolás Maduro into about $400,000 before that operation was disclosed. While U.S. regulators have welcomed prediction markets in Trump’s second term, Kalshi operates under CFTC oversight and is barred from listing contracts on war or terrorism, whereas Polymarket runs an overseas crypto exchange outside U.S. jurisdiction and has become a venue for highly controversial markets on warfare and geopolitical shocks. Former SEC commissioner Joseph Grundfest warns that anonymous crypto‑based platforms like Polymarket now sit at the intersection of "illegal, immoral and problematic" trading, underscoring growing pressure on regulators to confront insider‑trading‑style risks in prediction markets that increasingly touch U.S. policy and national‑security events.