Prediction markets have proven remarkably effective at aggregating dispersed information across many domains. From technology product launches to election forecasting, they often outperform expert predictions. But when applied to military operations, these same mechanisms create categorically different risks. Now Ukrainian volunteers, Russian military bloggers, and American security clearance holders alike can convert insider knowledge of military operations into profit through pseudonymous crypto wallets.
At 2 a.m. local time on Jan. 3, 2026, explosions echoed across Caracas. Low-flying aircraft struck military installations. Venezuelan President Nicolás Maduro and his wife were captured by U.S. forces. Hours earlier, a newly created Polymarket account had invested over $30,000 betting on Maduro’s exit. By morning, that position had netted roughly $400,000 in profit, a 1,200 percent return in less than 24 hours on a military operation.
While prediction markets theoretically prohibit insider trading, their design creates powerful incentives to monetize nonpublic information, and the platforms lack effective enforcement mechanisms to prevent it. In practice, insider trading on prediction markets is structurally incentivized. This ecosystem is no longer marginal. It now includes federally regulated exchanges such as Kalshi, crypto-native platforms like Polymarket operating offshore, and newer entrants backed by major financial and betting firms that are rapidly expanding the range of real-world events that can be traded.
This isn’t hypothetical anymore. In October, Venezuelan opposition leader María Corina Machado won the Nobel Peace Prize. Hours before the announcement, a brand-new Polymarket account placed initial bets of $68,000. The trader netted over $50,000 in profit and Norwegian authorities opened an investigation. In November, someone manipulated the frontline map that Polymarket uses to settle Ukraine territorial bets, fabricating a Russian advance timed precisely to trigger payouts, then erasing the evidence after settlement.
And now Venezuela. As U.S. special operations forces executed what President Donald Trump called an “incredibly dangerous attack,” someone was already positioned to profit from Maduro’s capture, betting on binary outcomes of an event they may have known was imminent.
At a conference last fall, Kalshi co-founder Tarek Mansour said: “The long-term vision is to financialize everything and create a tradable asset out of any difference in opinion.” Everything from dinner table disagreements to contested elections to whether a head of state gets arrested by Christmas can be raw material for a market.
Over the past five years, a certain kind of financial gamification has seeped into American life. It accelerated during the pandemic, when millions of Americans were stuck at home and bored between Zoom calls. They discovered they could day trade on their phones. What followed was a cascade of increasingly absurd speculation: the GameStop short squeeze, Dogecoin, $3 million images of cartoon monkeys. It felt like a joke, mostly. A victimless carnival.
But the logic never stayed contained. The same infrastructure, the same dopamine loops, the same rhetoric about “democratizing access” kept expanding. Sports betting apps proliferated, followed by prediction markets on elections, Fed rate decisions, celebrity breakups, and wildfire spread — and now, regime change.
Kalshi and Polymarket didn’t create this appetite. They’re supplying it. Kalshi was just valued at $11 billion. Polymarket secured backing from the parent company of the New York Stock Exchange. The market has spoken. We are the market.
Here’s what we’re buying.
Polymarket now hosts dozens of Venezuela contracts. Will the United States invade by March 31? Will another oil tanker be seized? How many drug boat strikes will be carried out by January 31? Within days of the Maduro operation, the platform added new contracts: Will the United States strike Colombia by year’s end? Cuba? Somalia by January 31? As the Wall Street Journal reported, traders are now betting on whether Iran’s Supreme Leader Ali Khamenei will be removed from power by June, with odds jumping from below 20 percent to 36 percent after the Venezuela operation. The market for Trump acquiring Greenland is low — but rising.
As the Wall Street Journal has noted, critics warn that prediction-market contracts tied to war can create harmful incentives, especially if insiders charged with carrying out military actions are tempted with side bets. Tens of millions of dollars are wagered on events that could kill thousands.
In Ukraine, a volunteer-built website called DeepStateMap — which villages are occupied, where the front is holding, where it looks fragile. Ukrainians check it the way Americans check the weather. For civilians in the east, it’s a survival tool.
Last year, a developer synced that map directly to Polymarket’s war-betting interface: hover over a village, see the odds. The place where someone’s parents live becomes the place where someone else has “Yes” priced to three decimal places.
The platforms say they’re aggregating information, surfacing truth better than polls or pundits. Perhaps. But when CFTC Chairman Rostin Behnam warned in 2023 that political event contracts would require the agency to monitor “countless participants in the political machinations” to prevent manipulation, he was highlighting a regulatory nightmare. Among the most troubling risks: what economists call an agency problem — a fundamental misalignment of incentives between those executing actions and those they serve.
A military commander should answer to civilian leadership and the mission objective. Now he also has a financial interest in whether his unit holds or retreats. A diplomat negotiating a ceasefire serves her country’s strategic interests, but if she’s placed bets on the talks failing, her incentives diverge from her duty. An intelligence analyst advising on military timing can front-run his own assessment.
To be clear, there is no public evidence that U.S. officials have placed such bets. That is precisely the problem: the system is designed so that we would likely never know.
Prediction markets tied to military and diplomatic outcomes generate three distinct risks. First, they incentivize monetizing nonpublic information. Second, they enable direct manipulation of outcomes. Third, they corrupt decision-making incentives among those with authority over events themselves. War uniquely activates all three.
When markets enable profiting from war, they create incentives to prolong it. When they enable profiting from diplomatic failure, they create incentives against peace. When classified information becomes tradeable alpha, the entire decision-making apparatus of national security becomes vulnerable to corruption.
Congress is beginning to notice. Rep. Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026, which would prohibit federal officials and appointees from trading prediction market contracts tied to government policy when they have nonpublic information. The restriction mirrors existing insider trading standards in traditional financial markets but extends them to prediction markets.
Yet critical questions remain unresolved. Should prohibitions apply only to those with direct access to classified planning, or extend across the interagency apparatus, including contractors and foreign liaison officers? Should certain event categories, such as kill-or-capture operations, covert action, and active military strikes, be prohibited entirely as bettable events, regardless of who is trading?
Enforcement presents a formidable challenge. Most platforms operate through offshore entities or decentralized blockchain protocols where traders use pseudonymous wallets. Effective regulation would require mandatory know-your-customer verification tied to government employment status, expanded blockchain forensics capabilities within the Treasury Department or the Commodity Futures Trading Commission, or categorical prohibition on hosting these contract types on U.S.-accessible platforms — the regulatory equivalent of export controls for financial products.
Consider the precedent: U.S. persons must disclose foreign bank accounts exceeding $10,000 under Report of Foreign Bank and Financial Accounts requirements. Extending similar disclosure obligations to crypto wallet addresses for federal employees with security clearances — integrated into existing Office of Government Ethics filings — could create an auditable trail where counterintelligence risk is most acute.
The regulatory tools already exist. In 2022, the Commodity Futures Trading Commission fined Polymarket $1.4 million for operating an unregistered derivatives exchange. Polymarket subsequently restructured, acquired a licensed exchange, and received Commission approval to resume limited U.S. operations in late 2025 through a registered intermediary. This demonstrates that compliance frameworks can be enforced. The question is whether regulators will apply them to markets tied to classified military operations.
The counterargument is that such trading would already be illegal under existing insider trading laws. Perhaps. But Polymarket operates offshore, offers pseudonymity, and exists in a regulatory gray zone. Kalshi is domestically regulated, but with definitions of material nonpublic information so loose for event contracts that enforcement is functionally infeasible.
More fundamentally, prediction markets function by rewarding those with superior information. In many domains, that means better analysis. In domains governed by secrecy, it means access to nonpublic knowledge. Mansour gestures toward this logic explicitly. When those informational advantages include security clearances, the system becomes a mechanism for converting classified intelligence into private profit.
Moscow and Beijing are certainly watching. Why spend resources recruiting assets when your adversary’s own national security apparatus is incentivized to leak through anonymous betting markets? Why run a complex disinformation campaign when you can simply place large bets to move markets and observe who profits, thereby identifying who has access?
The current configuration of prediction markets allows war to become a portfolio diversification strategy, where the same people briefing the President on military options can profit from their own recommendations, and the timing of a special operations raid can generate returns that dwarf a year’s government salary.
This is what the commoditization of everything actually means. Not just that we can bet on anything, but that we’ve come to see everything as a bet — elections, regime changes, military operations. Differences of opinion that once required argument, negotiation, and sacrifice are reduced to contracts and counterparties.
We have spent years training ourselves to treat everything as a trade. The habit seemed harmless when the stakes were meme coins and cartoon monkeys. But habits of mind migrate. The same frictionless interfaces, the same language of “positions” and “odds,” and the same dissociation from consequence are now applied to whether Caracas burns or whether Maduro sees a New York courtroom.
The long-term vision, Mansour says, is to financialize everything. He’s not wrong to pursue it. He’s reading the culture correctly.
But policy doesn’t have to follow culture. Several EU countries have declared prediction markets illegal under gambling law. The Commodity Futures Trading Commission has enforcement authority it hasn’t fully exercised. Congress can prohibit entire categories of contracts. Treasury can mandate disclosure regimes that make anonymous trading untenable for cleared personnel.
The question isn’t whether prediction markets on military operations are inevitable. The question is whether we have the institutional will to recognize that some events — those involving violence, classified planning, and state power — should remain outside the logic of the market.
War should not be a wager. National security decisions should not be profit opportunities. The technology exists to make them so. The regulation exists to prevent it.
What’s missing is the decision to act.
Alex Goldenberg is a fellow at Rutgers University Miller Center on Community Protection and Resilience and an affiliate with the New York University Institute for the Study of Emerging Threats.
Image: Gemini