ESMA warns prediction markets are rife with insider trading

September 12, 2026 at 07:54 PM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

The European Securities and Markets Authority concluded in its biannual risk report that prediction markets are rife with insider trading. The finding contradicts claims by promoters including President Trump and CFTC Chairman Michael S. Selig. The report cites a growing number of incidents.

Key Facts

ESMA's biannual risk report concluded that prediction markets are rife with insider trading.
Polymarket is now worth $21 billion, up from under $1 billion when Donald Trump Jr.'s firm 1789 Capital first invested.
In 2021, two Fed officials were found to have engaged in extensive stock trading in 2020 while the Fed was stabilizing financial markets.
Polymarket received a U.S. operating license last year after previously being banned from taking monetary wagers from U.S. residents.

ESMA Findings

The European Securities and Markets Authority published its biannual risk report on Thursday. The report concluded that a growing number of incidents illustrates that prediction markets are rife with insider trading. This conclusion runs counter to claims made by prediction market promoters, including President Trump and Donald Trump Jr. Michael S. Selig, Chairman of the Commodity Futures Trading Commission, is also among the promoters.

Conflicts of Interest

Prediction market enthusiasts claim that asset prices reveal true probabilities of events. This claim is undermined when large players can both bet in the market and influence the underlying events. On Polymarket, traders can buy an asset that pays one dollar if the Fed keeps interest rates unchanged in September. If FOMC members traded in that asset, its price would not reflect objective truth. In 2021, Fortune reported that two Fed officials engaged in extensive stock trading in 2020 while the Fed was stabilizing markets.

Polymarket Valuation

Donald Trump Jr.'s investment firm, 1789 Capital, bought shares in Polymarket after Donald J. Trump won the 2024 election. The New York Times reported that Polymarket had been banned from taking monetary wagers from U.S. residents, but last year a federal regulator granted it an operating license. Polymarket was worth under $1 billion when 1789 Capital first invested, and is now worth $21 billion.