Midterm Prediction-Market Trades Draw Insider-Trading Scrutiny

An investor reportedly made more than $180,000 betting on Abdul El-Sayed’s Michigan Senate race, but The Block’s on-chain review found no conclusive evidence of insider trading. The trader also bet about $191,000 on Republican Pete Ricketts’s Nebraska reelection. More than $77,000 followed in profit.

The allegations center on prediction-market bets placed shortly before polls appeared. Research cited by The New York Times linked the investor to large Kalshi and Polymarket positions in both Senate races. The backed candidates later showed leads in the polls.

What does the on-chain review show?

The Block reported on November 8 that The New York Times had recently cited research from Vanderbilt University. The study described an investor who placed large Kalshi and Polymarket bets just before polling results appeared in the Nebraska and Michigan Senate races.

In Michigan, about $623,000 went on Democratic candidate Abdul El-Sayed to win. In Nebraska, roughly $191,000 went on Republican candidate Pete Ricketts to win reelection. The Michigan wager earned more than $180,000. The Nebraska bet produced more than $77,000 in profit.

The review found the investor had used a similar strategy repeatedly before. Large bets went in early, and positions stayed open until election outcomes were decided.

The Block matched Kalshi trading data with fund-flow records. It found signs that the investor may also have placed a large bet about 10 minutes after Nebraska’s poll was released. Kalshi’s public trade data alone cannot identify who placed that transaction.

On-chain records cannot show what information the investor possessed. Insider trading remains possible, although unproven.

Was the trader using information or forecasts?

The investor traded heavily in decentralized finance and crypto derivatives alongside the election bets. About $2.99 million went into Hyperliquid shortly before the midterms. The trader lost about $783,000 over 26 hours.

Records also showed prior wagers exceeding $1 million on the New York mayoral election and the NFL Super Bowl.

Rajiv Sethi, an economics professor at Barnard College, said the trades appeared to target final election outcomes. He said they did not necessarily exploit short-term price swings tied to poll releases. Vincent Gregoire, a finance professor at HEC Montreal, said the investor may instead have relied on an in-house forecasting model or other information.

Those views do not clear the trader. Blockchain records alone make it difficult to determine what information the investor used. The insider-trading possibility has not been ruled out.

Who is checking the allegations?

Polymarket launched an investigation after becoming aware of the trades. The New York Times and Siena College said they would review the allegations.

The US Congress is watching how prediction markets guard against insider trading. Kalshi and Polymarket strengthened related rules this year. Their market-surveillance capabilities remain under debate as scrutiny continues.

What does this change for traders?

So far, investigators can trace behavior across venues, but not the information behind the trades. The next market-structure change depends on the pending reviews and congressional scrutiny, particularly whether Kalshi and Polymarket can strengthen surveillance against bets based on nonpublic election information.