CFTC says it is deploying AI to scan Polymarket and other prediction markets

Michael Selig said the Commodity Futures Trading Commission is using artificial intelligence to scan Polymarket and other prediction markets for illegal activity, extending the agency’s market-surveillance playbook to a fast-growing corner of derivatives trading. WIRED reported on May 15 that Selig described a program aimed at spotting insider trading and other misconduct in event contracts traded on thin, fast-moving markets. The comments add detail to a broader push Selig has described publicly since taking over the agency in late 2025. The CFTC has been moving on two tracks at once. Michael Selig has defended prediction markets as instruments under federal derivatives law, while also saying the agency will police them like other regulated venues. In a February 17 opinion piece posted by the CFTC, Selig wrote that exchanges including Kalshi, Polymarket, Coinbase and Crypto.com fall within the commission’s jurisdiction over event contracts. (wired.com) ### What exactly did Selig say the agency is doing? WIRED reported on May 15 that Selig said the CFTC is deploying AI to scour Polymarket and other prediction markets for illegal activity, including insider trading. The report said the system uses automated surveillance to flag anomalous trading patterns, especially in thin markets and around sudden bursts of volume. (cftc.gov) April 16 offers the closest public confirmation from Selig outside the interview. In testimony before the House Agriculture Committee, he said the agency was using “AI,” “automation” and “other surveillance systems” that it was building out to monitor markets. FedScoop, which covered the hearing, reported that Selig linked those tools to the CFTC’s ability to oversee expanding crypto and prediction markets with fewer staff. (wired.com) ### Why is Polymarket part of the story? Polymarket has been in the CFTC’s orbit for years. On January 3, 2022, the agency ordered Blockratize, doing business as Polymarket, to pay a $1.4 million civil penalty and wind down markets that did not comply with the Commodity Exchange Act. The CFTC said at the time that Polymarket had offered off-exchange event-based binary options without registering as a designated contract market or swap execution facility. (cftc.gov) February 17 showed how far the agency’s posture has shifted under Selig. In his CFTC-posted op-ed, Selig grouped Polymarket with other “CFTC-registered exchanges” and argued that states should not displace federal oversight of those markets. That position frames prediction markets less as a novelty product than as exchanges the commission says belong inside its existing surveillance and enforcement perimeter. (cftc.gov) ### What is the CFTC treating prediction markets as? Michael Selig wrote on February 17 that prediction markets — or event contracts — help participants hedge risk, aggregate information and test views about future outcomes. He said the Commodity Exchange Act treats event contracts as swaps and that Congress gave the CFTC broad authority over such instruments after the 2008 financial crisis. (cftc.gov) January 29 added a policy signal. In remarks posted by the CFTC, Selig said he would support the “responsible development” of event-contract markets, and outside coverage that day reported he had ordered staff to withdraw a 2024 proposal that would have barred certain sports and political event contracts. That leaves the agency trying to write rules for a market it is also saying it must surveil. (cftc.gov) ### How is the agency paying for that surveillance push? The CFTC’s fiscal 2027 budget request, released in April 2026, says the agency wants investments to improve market surveillance, data quality and analytics, and artificial-intelligence capabilities. FedScoop reported that Selig told lawmakers the commission was down 20% from the end of fiscal 2024 but still “adequately staffed” because technology was helping it monitor markets. (cftc.gov) The same April hearing put a number on the staffing plan. FedScoop said the fiscal 2027 proposal calls for 650 full-time positions and an $11 million funding increase for the Division of Data, which the budget justification says is meant to support enterprise analytics and AI capabilities. ### What comes next for prediction-market oversight? (cftc.gov) The next formal markers are already on the calendar. The CFTC’s April 2026 budget request is before Congress, and Selig told lawmakers on April 16 that he expects Congress to advance broader market-structure legislation affecting the agency’s expanding remit. At the same time, the commission has said it plans clearer rules for event contracts, leaving enforcement, surveillance design and contract standards as live issues for platforms including Polymarket and Kalshi. (fedscoop.com) (cftc.gov)