The prediction-market gold rush is here — and the shenanigans are getting messy

• Prediction markets were thrust into the spotlight last week amid a series of absurd events.
• The arrest of a US soldier accused of betting on a raid he planned felt like a tipping point.
• Detailed below are the categories of prediction-market shenanigans, and what could be done for each.

The rapid rise of prediction markets has involved a tacit agreement of sorts from participants. It's assumed — if not expected — that there's some degree of shenanigans going on, whether that means insider trading, market manipulation, or something else.

But that doesn't mean people have to like it. Just look at the growing legion of online sleuths scouring the Polymarket blockchain for suspicious activity around wagerable events.

Every time Trump makes a sudden political or military decision, the internet is flooded with examples of trades that appear suspicious, based on timing and size. Raising awareness of these situations is the public's way of fighting back.

Based on the news flow last week, efforts seem to be paying off. There were three high-profile examples of pushback from authorities against prediction-market malfeasance:

• French authorities are investigating suspicious spikes in temperatures at Paris Charles de Gaulle Airport, which they say coincided with winning Polymarket bets that paid out low five figures. One urban legend that gained traction online involved someone using a battery-powered blow dryer to manually heat a sensor. (It wasn't proven.)
• A US soldier involved in planning and carrying out Nicolás Maduro's capture was arrested and charged with using confidential info to win bets on Polymarket related to the operation. (Kalshi, meanwhile, blocked him from trading on their platform.) He allegedly made more than $400,000.

• Kalshi fined and suspended three congressional candidates from its platform after determining that they'd made bets on their own races.

Like I said, it was a wild week — one that highlighted multiple distinct categories of prediction-market shenanigans.

1. Outcome manipulation

This aligns with the Paris airport example. Someone (allegedly) heated a sensor, which pushed the temperature above a threshold that won a bet.

What can be done: Authorities and betting platforms can use multi-source data rather than a single "oracle." They can also add human review for suspicious outcomes.

2. Information advantage (insider trading)

The US soldier accused of trading on the Maduro raid he was involved in is a perfect example of this.

What can be done: This case will mark the first US prosecution for insider trading in prediction markets. A victory could set a key precedent for similar cases — and possibly deter others from attempting similar gambits. It also looks like lawmakers might start banning staff from being on prediction markets at all.

3. Market and information manipulation

This can mean making sizable trades in thin markets in order to catalyze a big move. It can also involve spreading rumors or amplifying information, in order to convince people to bet a certain way.

What can be done: Platforms can establish position limits, liquidity controls, and circuit breakers, especially in the thin market that are most vulnerable.

Are all of those solutions easier said than done? Absolutely! But the US military's insider trading case in particular feels like a turning point for prediction markets. The heat is officially on.

Now if you'll excuse me, I need to cash my (imaginary) "will First Trade write about prediction markets" bet.