The White House has issued a staff-wide email warning against insider trading, following a series of suspicious oil trades this year amidst the US-Israeli conflict with Iran. Concerns over remarkably prescient trades, which had become a regular occurrence, extend to new platforms like Polymarket. Polymarket is an online prediction platform that allows users to place bets on hyper-specific event contracts concerning various outcomes, including policy decisions and government actions. The company states it refers cases involving classified government information to the Justice Department, asserting that “insider trading has no place on Polymarket.”
A New York Times report detailed dozens of dubious trades on Polymarket, with nine connected accounts reportedly making over $US2.4 million betting almost entirely on US military actions. Beyond these new event contract markets, oil futures again saw suspicious sell-offs recently, preceding news of potential progress in ending the Iran war. This behaviour echoes the “anything-goes” sharemarket of the 1920s, where a regulatory vacuum allowed an informed elite to profit, ultimately leading to a significant loss of public trust. Such activity today, though hard to quantify, threatens market integrity and investor confidence, especially given record retail investor participation.
Well-founded concerns persist that government bodies are doing too little to police insider dealing. Despite the US Securities and Exchange Commission (SEC) asserting its goal to increase the cost of fraud, it recorded its fewest enforcement actions in a decade last fiscal year, and its enforcement director recently resigned. While authorities have pursued some cases, such as a US Army soldier charged with using classified information on Polymarket and an alleged mergers and acquisitions insider-trading ring, a Commodity Futures Trading Commission inquiry into suspicious oil trades only began after encouragement from Democratic senators. Less active regulation risks signalling to “bad actors” that the odds of crime paying off are improving, making it imperative for policymakers to protect America’s financial reputation.
