Prediction markets allow people to bet on various events, from basketball games to presidential elections. A trader recently made over $400,000 by betting on the downfall of former Venezuelan President Maduro. Questions arise about insider trading due to the timing of the wagers. Polymarket, a major platform, has not commented on the issue.

Commercial use of prediction markets has surged, offering users the chance to bet on a wide range of events. The price of event contracts fluctuates based on the likelihood of an event occurring. Proponents argue that prediction markets lead to better forecasts, but critics warn of financial losses and potential insider trading.

Polymarket and Kalshi are major players in the prediction market industry. Polymarket was barred from operating in the U.S. in 2022 but returned under the Trump administration. Kalshi, a federally-regulated exchange, offers event contracts on elections and sports. Other big names, like DraftKings and FanDuel, have also entered the prediction market space.

Prediction markets are regulated by the CFTC, allowing them to bypass state-level restrictions on traditional gambling. Sports betting is a key focus, with some states and tribes suing to stop it. Federal law restricts event contracts related to gaming, war, terrorism, and assassinations, raising questions about legality.

Lawmakers are calling for stronger oversight of prediction markets following suspicions of insider trading. A bill has been introduced to curb government employees’ involvement in politically-related event contracts. Kalshi’s CEO supports the move, emphasizing the need to crack down on unregulated prediction markets.

Read more at Yahoo Finance: A $400,000 payout after Maduro’s capture is putting prediction markets in the spotlight