CFTC adopts AI and blockchain analytics to surveil prediction‑market trading

The Commodity Futures Trading Commission is using artificial intelligence and blockchain analytics to police trading in prediction markets, according to comments by Chairman Michael Selig published by WIRED on May 15 and recirculated in follow-on reports on May 18. Selig said the agency is monitoring suspicious activity on venues including offshore platforms and is using software to sort large volumes of trading data. The CFTC’s public posture on the issue has hardened this year as prediction markets have expanded and insider-trading cases have begun to emerge. The agency has also paired that message with formal enforcement guidance and court fights over its jurisdiction in event contracts. ### What, exactly, did Selig say the CFTC is doing? Michael Selig told WIRED that the CFTC is using AI to identify patterns in prediction-market trading and decide where to investigate next, according to the report and a May 18 PYMNTS summary. Selig said the agency is watching for U.S.-based traders who use virtual private networks to access foreign prediction markets and added, “We’re going to find them, and we’re going to bring actions.” (wired.com) The May 18 PYMNTS report said the agency’s toolkit includes proprietary surveillance systems, blockchain tracing tools from Chainalysis and market-abuse software including Nasdaq Smarts. WIRED described the CFTC as lean on staffing, and Selig said AI helps the agency narrow where subpoenas or other investigative steps may be needed. (wired.com) ### Why is prediction-market insider trading now a named enforcement priority? David Miller, the CFTC’s director of enforcement, said on March 31 that insider trading, including in prediction markets, is one of the division’s five priority areas. In remarks at NYU Law School, Miller said the agency was “at the forefront of regulating prediction markets and crypto assets” and said the division would focus on policing fraud, abuse and manipulation. (pymnts.com) The CFTC followed that speech with a series of public actions. Its press-release page shows the agency sued several states in April to defend federal jurisdiction over prediction markets, named Innovation Task Force staff on April 10, and issued event-contract guidance on May 13. Those steps place surveillance efforts inside a broader campaign to assert control over the market’s legal perimeter. (cftc.gov) ### What public cases has the agency pointed to? The CFTC’s Division of Enforcement issued an advisory on February 25 after two Kalshi-related cases involving misuse of nonpublic information and fraud in event contracts. In one 2025 case, Kalshi penalized a political candidate who traded on his own candidacy and imposed a five-year suspension. In another, Kalshi found that a YouTube editor likely traded with advance knowledge of unpublished videos and imposed a financial penalty and a two-year suspension. (cftc.gov) The same advisory said the Commission has full authority to police illegal trading practices on designated contract markets, including those involving prediction markets. The CFTC’s press-release index also lists an April 23 case charging a U.S. service member with insider trading in Nicolás Maduro-related event contracts, indicating the issue has moved beyond compliance warnings into formal enforcement. (cftc.gov) ### Why do blockchain tools matter in this market? Polymarket and similar venues use crypto infrastructure, which means wallet flows, funding paths and linked addresses can be reconstructed with commercial blockchain software, according to the May 18 PYMNTS report. That gives regulators a way to connect trading behavior, wallet activity and cross-platform movement even when activity occurs outside a conventional brokerage account structure. (cftc.gov) Nasdaq Smarts and similar market-surveillance systems are built to flag unusual patterns in order placement, timing and counterparties. Combined with onchain tracing, those tools can help investigators compare a trader’s wallet behavior with event timing, public disclosures and known relationships, based on the reporting about the CFTC’s toolset. (pymnts.com) ### What does this change for firms and traders? U.S. enforcement officials have already said prediction-market insider trading falls under existing anti-fraud authority. Miller said on March 31 that insider trading in prediction markets violates the Commodity Exchange Act when it involves misappropriated information, and the February 25 advisory laid out examples tied to direct influence over outcomes or access to confidential information. (pymnts.com) For trading desks, that means surveillance risk is no longer limited to exchange compliance teams. The next public markers are likely to come through CFTC enforcement releases, court filings tied to event-contract jurisdiction, and any additional cases resembling the February advisory or the April 23 Maduro-contract action listed on the agency’s docket. (cftc.gov 1) (cftc.gov 2)