That is one of many questions that came up Thursday after the latest set of profitable, well-timed trades came under scrutiny on Polymarket, one of the largest exchanges in the nascent prediction market industry.
The case cropped up after a well-known crypto researcher, who operates under the pseudonym ZachXBT, said on social media that he was preparing to release the name of a company whose employees he believed had used non-public information to place profitable trades.
Polymarket created a contract that allowed customers to bet on the name of the company that ZachXBT would reveal, attracting around $40 million in trading since it went up on Monday.
After ZachXBT released his findings and the name of the company — Axiom — on Thursday morning, a number of online sleuths immediately identified several profitable bets that suggested someone knew the answer early and traded on the information before it was released.
“Did Axiom employees commit more insider trading on the ZachXBT market?” Polysights, a data terminal for prediction markets that tracks such behavior, wrote in a post on X on Thursday.
The allegations suggest an ouroboros of insider trading that underscores the novel regulatory problems created by prediction markets as they swiftly rise in popularity and offer a new form of financial speculation with unclear guardrails.
Polysights, which is not affiliated with Polymarket, operates a tool that looks for signs of insider trading on Polymarket’s public ledger. It does so by identifying large bets from newly created wallets, highlighting those whose bets are concentrated in a single market or who place trades immediately after setting up their account.
Five wallets identified by Polysights bet around $50,000 collectively on Axiom to be named, netting the holders a combined profit of roughly $266,000.
A separate analysis by researchers at Lookonchain, another analytics firm, found 12 potential insider wallets that had bet on Axiom. Those wallets made a combined profit of around $1 million.
Axiom, for its part, said it was “shocked and disappointed” by the ZachXBT’s findings, adding in an X post that it would continue to investigate the matter. It didn’t immediately respond to a request for comment on whether it was aware of any employees trading on the Polymarket wager.
Polymarket didn’t immediately respond to a request for comment.
For now, those are just allegations, and it’s unclear what sort of insiders might have been involved. It could have been people who knew about ZachXBT’s findings. It could have been the people who did the original insider trading and thus had a sense of what ZachXBT might discover.
ZachXBT said on social media that he had contacted Axiom for comment and conducted several interviews before publishing, making a leak “probably inevitable.” The blockchain records offer few hints in this direction, and Polymarket’s offshore platform that hosted the bets doesn’t conduct identity checks.
In the days leading up to publication, another crypto trading platform called Meteora had been the market’s front-runner. When a Meteora co-founder appeared to deny any involvement in a social media post on Wednesday, the wager quickly flipped in Axiom’s favor, where its odds reached a peak of 46.2%.
The controversy ramps up the concerns about the vulnerability of prediction markets to such issues, as regulators race to get their heads around the fast-growing sector.
Just this week, rival trading platform Kalshi said it had caught and punished an employee of the YouTuber, MrBeast, who had made profitable trades on contracts tied to what would happen in MrBeast videos. It also fined a former candidate for California governor who’d placed a bet on his own campaign.
The Commodity Futures Trading Commission, which has taken responsibility for overseeing prediction markets, has exercised a light-touch approach to regulating the space under the current Trump administration. But after Kalshi’s announcement, the agency said in an advisory that it “has full authority to police illegal trading practices.”
Polymarket is opening a US exchange that is under CFTC oversight, primarily offering sports bets. But the Axiom wager occurred on Polymarket’s much larger international venue, which doesn’t answer to the agency.
