Polymarket bets on OpenAI releasing a new model, market questions insider trading

Author: Zhao Ying, Wall Street Insights

The prediction market is facing scrutiny over potential insider trading allegations. According to The Information, several Polymarket accounts recently placed bets and profited before the release of major products by OpenAI and Google, raising questions about whether these platforms are being exploited by insiders. This has prompted more tech companies and financial institutions to include prediction markets under insider trading regulations.

One week before OpenAI released GPT-5.2 on December 11, multiple Polymarket accounts bet that the company would launch a new large language model by December 13. After the product was released, four of these accounts collectively made over $13,000 in profits. Similarly, last week, a Polymarket account accurately predicted Google’s search data in 2025, earning over $1 million in a single day. These abnormal account performances are suspected to be operated by insiders.

This phenomenon is driving policy changes within companies. Conway Dodge, a partner at KPMG, said that over the past six months, discussions with corporate clients about including prediction markets in insider trading policies have at least doubled. Robinhood updated its policy over a year ago to cover prediction markets, and Coinbase expanded its policy months ago to “prohibit employees, including executives, from participating in prediction markets.” OpenAI and Anthropic stated that their policies explicitly restrict employees from using confidential information for personal gain, including placing bets on prediction sites.

The rapid growth of prediction markets has intensified regulatory urgency. According to data from crypto data provider Artemis Analytics, Kalshi’s trading volume has surged about fivefold over the past six months, with an average daily trading volume of $183 million in the past week. Polymarket’s daily trading volume has increased more than six times to $197 million.

Suspicious Trading Patterns Raise Concerns

Some accounts’ “foresight” has become a focus of suspicion. These users repeatedly place large bets before announcements from the same company, with very high accuracy.

Based on transaction records displayed on Polymarket, four accounts betting on OpenAI’s new model release entered the market a week before the product launch. When GPT-5.2 was released as scheduled, these pre-positioned accounts quickly realized gains.

Last week, a larger controversy arose over a bet on Google. This account made over $1 million in a single day by accurately predicting Google’s search data in 2025. This performance has sparked widespread suspicion among internet commentators, who believe the account may be operated by Google insiders. A Google spokesperson declined to comment on whether the company has insider trading regulations related to prediction markets.

As artificial intelligence draws increasing public attention, these prediction sites are offering more betting options related to tech product releases—topics that are too niche for traditional gambling sites. For example, on Kalshi, users can spend 48 cents to bet that designer Jony Ive, currently collaborating with OpenAI, is developing a clip-on device for the company, or 23 cents to bet that he is working on a headset. If the bet is correct, the contract is worth $1.

The Legal and Regulatory Gray Area

Insider trading in prediction markets remains in a regulatory blind spot. U.S. securities laws prohibit trading based on “material nonpublic information,” but the U.S. Securities and Exchange Commission (SEC) does not regulate prediction market contracts because they are not classified as securities.

Lawyers say jurisdiction over such cases would fall to the Commodity Futures Trading Commission (CFTC), which regulates futures trading, or the Department of Justice. However, profiting from using confidential information in prediction markets may violate employees’ legal duties to their employers. George Canellos, a lawyer at Milbank LLP specializing in corporate governance and securities law, said, “This is a form of fraud similar to embezzlement, because you are secretly using information to profit yourself.”

Dodge, who previously worked in SEC enforcement, believes this “may be the next issue that financial institutions and other clients need to consider.”

On Thursday, several companies, including Kalshi and Coinbase, announced the formation of a new industry organization that will advocate for federal rather than state regulation. One of its initial initiatives will focus on establishing national standards for insider trading.

Contradictory Positions Among Industry Leaders

Adding complexity, some industry leaders have hinted that employees should be allowed to bet on their own company’s activities. Coinbase CEO Brian Armstrong revealed at last week’s NY Times DealBook Summit that he was recently asked whether insider trading should be permitted in prediction markets.

Armstrong responded that the question “is not clear.” He gave an example that if people want to know whether the Suez Canal will reopen, allowing naval officers on ships in the canal to place bets would make market predictions more accurate. But on the other hand, “you want to maintain the integrity of these markets.”

In fact, some companies, including Google and Anthropic, have established their own internal prediction markets. Employees can place bets on questions like when the team will complete a project, without using real money.

Dan Schwarz, CTO of Metaculus and former Google prediction market builder, said that in these cases, the market forecasts are kept within the company, so they do not harm the company’s interests. For these internal prediction markets, “you’re not trying to prevent insider trading, but rather enabling it. You’re trying to get people to reveal what they know.”

Rapid Expansion of Prediction Markets

Concern over regulation is coinciding with explosive growth of these platforms. After a surge of users betting on the 2024 presidential election, Kalshi and Polymarket have seen activity increase over the past year. Both sites allow users to buy event contracts for less than $1—these derivatives pay out to investors who correctly predict the outcome of events. Users pay upfront for the contracts; if they guess correctly, they can recover their funds and make a profit.

Kalshi’s co-founder said the flexibility to bet “any opinion” makes prediction markets very popular. According to data from Artemis Analytics, Kalshi’s trading volume has surged about fivefold over the past six months, with an average daily trading volume of $183 million in the last week under CFTC regulation.

In September, Polymarket announced that the CFTC had approved it to serve U.S. users, after being banned from accepting such trades three years earlier. Its trading volume has increased over six times, reaching an average of $197 million daily. Investors are competing at higher and higher valuations to support these companies.

Robinhood operates its own prediction market, and Coinbase plans to launch one next week.