Polymarket Investigates Suspected Insider Trading in Israeli Election Bets

Polymarket, a major global prediction market platform, is investigating dozens of digital wallets that placed bets on the outcome of the recent Israeli elections just hours before polls closed. The investigation focuses on a surge of over 600 new accounts created on election day, with no prior trading history, that bet on Benjamin Netanyahu becoming the next Prime Minister and the Likud party winning the most seats. These bets quickly became profitable as early exit polls indicated a Likud advantage.

While the individual amounts wagered were relatively small, the pattern has raised suspicions. Some accounts have already withdrawn over $100,000, with others holding significant paper profits. One account, potentially earning $180,000, received a nearly $40,000 deposit from Tron blockchain wallets previously flagged for malicious activity and sanctions-related addresses. This activity contrasts sharply with months of betting that favored Gadi Eisenkot as the more likely Prime Minister candidate, reflecting pre-election polls showing declining support for Netanyahu.

Data analysis firms Polysights and Bubblemaps have also flagged the activity as unusual. However, Polymarket acknowledges that distinguishing between insider information, good research, and luck is difficult in a market with millions of transactions. All trades on Polymarket's crypto-based international exchange are recorded on a public ledger, allowing for transparency.

Polymarket has a dedicated 16-person intelligence and investigations team, supported by a new system designed for election monitoring. The company stated its message to potential offenders is clear: they will be caught. This investigation occurs amidst a turbulent week for the platform, which experienced a trading halt due to a breach affecting a third-party provider, DebugBear, leading to unauthorized withdrawals of at least $2.7 million from 710 wallets. Polymarket has committed to refunding affected users.

Simultaneously, U.S. Senators Elizabeth Warren and John Curtis have sent a letter to Polymarket and competitor Kalshi, expressing concerns about potential undetected insider trading ahead of the U.S. midterm elections. Polymarket has a complex history in the U.S., including a $1.4 million settlement with the CFTC in 2022 and a subsequent return to the U.S. market under Polymarket US after regulatory hurdles were addressed.

In Israel, the legal framework for such activities is complex. While gambling is generally illegal, the use of inside information for betting on events, rather than securities, relies on other offenses. The article notes past cases, including an indictment against individuals accused of using secret military information to bet on security operations in Iran, and a U.S. soldier accused of exploiting sensitive operational information.