Betting on "OpenAI releases new model" on Polymarket, the market questions the existence of "insider trading"

The market is facing scrutiny over insider trading suspicions. According to The Information, several Polymarket accounts recently placed bets and profited before OpenAI and Google released significant products, raising questions about whether these platforms are being exploited by insiders, prompting more tech companies and financial institutions to include prediction markets in their insider trading regulations. A week before OpenAI's release of GPT-5.2 on December 11, several Polymarket accounts bet that the company would launch a new large language model by December 13. After the product launch, these four accounts collectively profited over $13,000. Similarly, last week, one Polymarket account accurately bet on Google's 2025 search data, earning over $1 million in a single day. These unusually performing accounts are suspected to be operated by company insiders. This phenomenon is driving changes in corporate policies. KPMG partner Conway Dodge stated that the number of discussions with corporate clients about whether to include prediction markets in insider trading policies has at least doubled in the past six months. Robinhood updated its policy over a year ago to cover prediction markets, while Coinbase expanded its policy months ago to "prohibit employees, including executives, from participating in prediction markets." OpenAI and Anthropic have stated that their policies explicitly restrict employees from using confidential information for personal gain, including betting on prediction websites. The rapid growth of prediction markets has intensified regulatory urgency. According to data from crypto data provider Artemis Analytics, Kalshi's trading volume surged about fivefold in the past six months, with an average daily trading volume of $183 million in the last seven days. Polymarket's average daily trading volume has also jumped over sixfold to $197 million. Suspicious Trading Patterns Raise Concerns The "foresight" exhibited by some accounts has become a focal point of suspicion. These users repeatedly placed large bets before the same company made announcements, with a very high accuracy rate. According to trading records displayed on Polymarket, the four accounts betting on OpenAI's release of a new model entered the market a week before the product launch. When GPT-5.2 was released as expected, these pre-positioned accounts quickly realized their profits. Last week, a bet on Google sparked even greater controversy. This account profited over $1 million in a single day through a series of accurate predictions regarding Google's 2025 search data. This performance has raised widespread skepticism among internet commentators, who believe that the account may be backed by Google insiders. A Google spokesperson declined to comment on whether the company has insider trading regulations regarding prediction markets. As artificial intelligence captures more public attention, these prediction websites are increasingly offering betting options related to tech product launches—topics that are too niche for traditional gambling sites. For example, on Kalshi, users can bet 48 cents that designer Jony Ive, who is currently collaborating with OpenAI, is developing a clamshell device for the company, or bet 23 cents that he is working on a headset. If the bet is correct, the contract is worth $1 The Gray Area of Law and Regulation The insider trading issues in prediction markets fall into a regulatory blind spot. U.S. securities laws prohibit trading based on "material non-public information," but the U.S. Securities and Exchange Commission (SEC) does not regulate prediction market contracts because they do not qualify as securities. Lawyers indicate that jurisdiction over such cases would fall under the Commodity Futures Trading Commission (CFTC), which regulates futures trading, or the Department of Justice. Nevertheless, profiting from confidential information in prediction markets may violate employees' legal obligations to their employers. George Canellos, a lawyer at Milbank LLP specializing in corporate governance and securities law, stated, "This is a form of embezzlement-like fraud because you are secretly using information for your own benefit." Dodge, who previously worked in the SEC's enforcement division, believes this "could be the next issue that financial institutions and other clients need to start considering." On Thursday, several companies, including Kalshi and Coinbase, announced the formation of a new industry organization that will advocate for federal rather than state-level regulation. One of the organization's initial initiatives will focus on establishing national standards against insider trading. Contradictory Positions of Industry Leaders Complicating matters further, industry leaders sometimes suggest that employees should be allowed to bet on their company's activities. Coinbase CEO Brian Armstrong revealed at last week's New York Times DealBook Summit that he was recently asked whether insider trading should be permitted in prediction markets. Armstrong responded that the issue is "not clear-cut." He cited the example of whether people want to know if the Suez Canal will reopen, suggesting that if naval officers on ships in the canal were allowed to participate in betting, market predictions would be more accurate. On the other hand, "you want to maintain the integrity of these markets." In fact, some companies, including Google and Anthropic, have already established their own internal prediction markets. Employees can bet on questions such as when their teams will complete projects without using real money. Dan Schwarz, who built Google's current prediction market and serves as the Chief Technology Officer of the prediction site Metaculus, stated that in these cases, market predictions remain internal to the company, thus not harming corporate interests. For these internal prediction markets, "you are not trying to prevent insider trading; you are trying to facilitate it. You are trying to get people to disclose what they know." Rapid Expansion of Prediction Markets The focus on regulating prediction markets comes as these platforms experience explosive growth. Following a surge of users betting on the 2024 presidential election, Kalshi and Polymarket have seen a significant increase in activity over the past year. Both sites allow users to purchase event contracts for less than $1—these derivatives pay returns to investors who correctly guess the outcomes of events. Users pay the contract fee upfront, and if they guess correctly, they can recoup their funds and earn a profit. The flexibility to bet on "any disagreement," as described by Kalshi's co-founder, has made prediction markets extremely popular. According to data compiled by crypto data provider Artemis Analytics, Kalshi, which operates under CFTC regulation, has seen its trading volume surge nearly fivefold over the past six months, with an average daily trading volume of $183 million in the last seven days In September, Polymarket announced that the CFTC had approved its services for U.S. users, after the agency had prohibited it from accepting these trades three years ago. The platform's trading volume surged more than sixfold, reaching an average daily volume of $197 million. Investors are competing to support these companies at increasingly higher valuations. Robinhood operates its own prediction market, and Coinbase plans to launch a prediction market next week