Polymarket, Maduro Trading, and Allegations of Insider Trading
Polymarket is currently facing the first of what is sure to be several controversies regarding the prediction market for crypto based on the arrest of Venezuelan President Nicholas Maduro. A group of unidentified Polymarket users placed a bet on his removal and have now earned over $630,000 as a result of the prediction coming due.
Since the arrest of Maduro has been very public due to the U.S. capturing him, the prediction is very likely to be accurate. If so, the prediction would bring a host of public relations issues for Polymarket surrounding the potential for public “insider trading” as well as for decentralized prediction markets.
Financial activities on Polymarket with regard to Maduro’s removal have been the subject of several Wall Street Journal articles, specifically those published on the day of the arrest. A particularly interesting data point from that day is the sizeable increase, between 1 hour and 1 minute before his arrest, of activity on the Polymarket with respect to the prediction.
At his removal, the estimate for Maduro’s displacement by January 31 was at 6%. Less than 1 hour before the President of Venezuela was removed from the position, the data forecasted a 6% chance and immediately after, the data placed the estimate chance of displacement at 6%. Specifically, the data indicates an empty window of activity for over 1 hour preceding the event.
These data points, when coupled with the previously mentioned parameters and documents, immediately lead to questions of a “possible” public prediction market on Polymarket. For now, the activities surrounding the Maduro event have, and most likely will continue to, dominate the public relations surrounding the prediction markets for crypto.
The situation became more controversial when the on-chain analytics platform Lookonchain reported three newly created Polymarket wallets for the bets. From the wallets, the Polymarket bets profit approximately $630,000. One of the wallets claimed to convert a bet of $34,000 into almost $400,000.
The other 2 wallets also posted large bets. The further bet placed suspicions was the bets placed on the Venezuela and Nicolás Maduro events. They also have no record wagering on other prediction markets.
Buy and sell Lookonchain considered the trades as “a clear case of insider trading. They rushed into the trades as the crypto space became more risk prone due to the growing fears of Polymarket traders.
These controversial wallets prior to the reported arrest by the US military of Nicolás Maduro and his wife, Cilia Flores on the other hand, is also a “geopolitical shock”. The charges are narco-terrorism conspiracy, cocaine-importation conspiracy, and weapons-related offenses. Maduro’s son also has the same allegations along with some of the senior officials. Although the situation is controversial, reports claim that the crypto market remains stable despite the situation.
The U.S. Attorney General Pam Bondi said recently, “Maduro and his wife are going to face the full wrath of American justice on American soil in American courts.” The comments show US officials have escalated the case. The Polymarket traders have accurately captured the expected outcome for the trades.
Prediction Markets Facing Unprecedented Scrutiny
The size and nature of these bets has brought even more scrutiny to prediction markets. From 1.15 am to 1.50 am, Polymarket odds for removal of Maduro are said to have spiked from 6 to 12.5%, suggesting untypically large volume trades right before the arrest.
Some traders believe there are movements that can be done to undermine the trust of prediction markets through the applicability of insider trading.
In addition to the growing popularity of prediction markets, these worries become greater. Established companies in the crypto sector have begun to enter the prediction market sector; Coinbase has recently opened a prediction market with Kalshi, and Gemini and Crypto.com are also said to be entering the same market.
With the increasing popularity of prediction markets, the Polymarket and Maduro prediction market incident will likely be used to guide future legislations in the areas of transparency, regulation, and ethics within decentralized wagering.
