Written by: Clow, Plain Language Blockchain

On January 3, 2026, at 4:20 AM, U.S. President Trump officially announced: Venezuelan President Maduro has been arrested. Global media was shocked, intelligence agencies from various countries held emergency meetings, and Washington was in turmoil all night.

But in the world of blockchain, this "stunning news" was no longer a secret.

Just 6 hours earlier, there were frenzied bets on Polymarket that "Maduro will step down before January 31." A mysterious wallet ending in 0x31a5 swept up all the sell orders in the market at any cost. An initial investment of $34,000 turned into over $400,000 in less than 24 hours, with a return on investment of 1205%.

What is even more chilling is that this wallet was created on December 27, precisely during the time window when the U.S. military postponed its Christmas raid plan due to weather.

Someone had prior knowledge of the Pentagon's top secrets.

Prediction markets—once regarded as a "crystallization of collective wisdom" in decentralized tools—are turning into a "monetization channel" for global confidential information. When on-chain data provides earlier warnings of military actions than the CIA, and when blockchain becomes a paradise for leakers, what exactly is happening in this market?

01 Three Iconic Insider Trading Cases

Maduro's Arrest: Monetization of Military Secrets

Let’s first review that thrilling weekend.

Before Maduro's arrest, the contract price on Polymarket regarding "Will Maduro step down before January 31?" lingered between 6-7 cents for a long time, indicating that the market believed the probability of this event occurring was only 6%-7%.

However, starting from December 27, the 0x31a5 account began to accumulate shares in batches as if it knew the script. To avoid drawing attention, they adopted a low-profile strategy, keeping their holding costs at an extremely low level.

The real turning point occurred at 10 PM on Friday, January 2. According to monitoring data from Axios and Lookonchain, this account suddenly stopped concealing its actions and began to buy aggressively, directly consuming all the liquidity in the order book.

This behavior has a professional term in financial markets: a typical characteristic of informed traders—they do not care about price slippage, only about holding as many chips as possible before the information is made public.

Hours later, the news of Maduro's arrest broke, and the contract price instantly converged to $1. These mysterious accounts executed a perfect strike.

Blockchain analysis firm Lookonchain bluntly stated: "All three addresses only placed bets on events related to Venezuela and Maduro, with no other trading history—this is a clear sign of insider trading."

The more serious issue is: if Maduro's security team had monitored the data anomalies on Polymarket at that time, they could theoretically have gained several hours of warning time. The prediction market has become a public "intelligence leak dashboard."

Google's Annual Search: The Perfect Prediction of "AlphaRaccoon"

If the Maduro incident involved political power, then the "AlphaRaccoon" incident revealed the vulnerability of commercial data.

At the end of 2025, Polymarket opened a prediction market on "Google's 2025 Annual Search Terms." This was supposed to be an entertainment market where users guessed based on popular cultural trends.

However, the emergence of user "AlphaRaccoon" disrupted the balance. He placed bets on 23 different categories in a short time and accurately predicted the outcomes of 22 of those categories.

Most shockingly, his operation in the "Most Searched Person" category involved a heavy bet on singer d4vd. At that time, d4vd's winning probability was only priced at 0.2% by the market, making it nearly impossible to win. But when the results were revealed, d4vd indeed ranked first.

This account made over $1 million in profit in a single day.

Analysis suggests this may stem from a leak of internal Google data—perhaps a test page was briefly indexed, or an employee with access to backend data directly participated in the trading. Regardless of the scenario, it proves that prediction markets can absorb corporate internal secrets with extreme efficiency.

OpenAI GPT-5.2: The Leak Game in Silicon Valley

In the field of artificial intelligence, the value of information is also measured in milliseconds.

On December 11, 2025, OpenAI officially released the GPT-5.2 model. However, a week prior, four specific accounts had already begun buying contracts predicting "OpenAI will release a new model before December 13."

On the day of the model's release, these accounts immediately closed their positions, making a profit of about $13,000. Although the amount is not as large as in the Google case, the precision of the timing—building positions a week in advance and exiting immediately after the event—demonstrates typical insider trading characteristics.

This also forced AI giants like OpenAI and Anthropic to update their employee handbooks, explicitly prohibiting employees from using company secrets to place bets in prediction markets, and even Coinbase expanded its insider trading policy to cover such behavior.

02 Why Prediction Markets Become Hotbeds for Insider Trading?

Inherent Technical Flaws

The reason prediction markets easily become hotbeds for insider trading is closely related to their underlying technical architecture.

The anonymity of blockchain is the first missing line of defense. Although Polymarket ostensibly restricts U.S. users, anyone from any corner of the globe can participate through VPNs and decentralized wallets. Unlike the strict KYC of traditional brokers, prediction markets cannot easily identify whether a trader is a Google executive or a Pentagon advisor.

The AMM mechanism provides clues for identifying insider traders. In markets with limited liquidity, the injection of large funds significantly drives up prices. Ordinary speculators tend to place orders and wait for execution to reduce slippage costs, while insider traders, possessing certain information, are more inclined to buy at market prices, even at the cost of high slippage to seize shares. In the Maduro case, the "whale" directly "eating" the sell orders exemplifies this characteristic.

The oracle risk is even more fatal. In the prediction market for the "U.S.-Ukraine Mineral Agreement," a "whale" holding a large amount of UMA tokens forcibly voted to determine the outcome as "yes," despite public evidence showing the agreement had not been reached. This exposed the fatal weakness of DeFi prediction markets—they do not record objective truths but rather "capital-weighted consensus."

Legal Gray Area

In the U.S. legal system, the definition of insider trading varies significantly between the securities market and the commodities market.

For the stock market, the Securities and Exchange Commission (SEC) strictly prohibits insider trading based on the "Securities Exchange Act of 1934." However, prediction markets are classified as "event contracts," falling under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

For a long time, the CFTC's definition of insider trading has been narrower. Trading commodities based on non-public information (such as farmers predicting corn futures based on their own yields) has been allowed and even seen as part of market price discovery.

This ambiguity in legal definitions makes it exceptionally difficult to prosecute insider traders in prediction markets.

The Maduro incident became a catalyst for regulatory intervention. U.S. Congressman Richie Torres quickly acted, announcing the introduction of the "2026 Financial Prediction Market Public Integrity Act." It explicitly prohibits federal elected officials, political appointees, and executive branch employees from participating in prediction market contracts related to government policies, government actions, or political outcomes when they possess or may obtain significant non-public information through their positions.

This is the first legislative effort specifically targeting prediction markets.

The tightening of laws is reshaping the market landscape. As a designated contract market registered with the CFTC, Kalshi explicitly prohibits insider trading and collaborates with regulatory agencies for identity verification. While Polymarket reached a settlement with the CFTC in 2022 and blocked U.S. IPs, its actual operating model remains in a regulatory gray area.

03 The Game of Efficiency and Fairness

Beyond technology and law, the Maduro incident has sparked a philosophical debate about the nature of the market.

Economists' View: Insider Trading Increases Market Accuracy

Economist Robin Hanson, a pioneer of prediction market theory, proposed a counterintuitive viewpoint: insider trading actually increases market accuracy.

From an information theory perspective, if someone knows that Maduro will be arrested tonight and bets accordingly, they are essentially broadcasting this high-value information to the world for free. Through price movements, the market "discovers" the truth before the official announcement.

Hanson argues that if we want to use prediction markets to guide decision-making, we should not prevent informed participants from joining, as their participation eliminates noise and leaves only the signal.

Moreover, prediction markets are zero-sum games, where participants are there to speculate. Unlike the capital formation involved in stock markets, prediction markets resemble an information bounty mechanism. Therefore, the traditional logic of "protecting small investors" may not fully apply here.

Regulators' Concerns: Lemon Markets and Moral Hazard

However, from the perspective of regulators and public psychology, allowing insider trading is unacceptable.

If ordinary participants realize that their opponents always possess the "God's eye view" of insiders, they will ultimately exit the market. According to Akerlof's "Lemon Market" theory, this will lead to a depletion of market liquidity, and ultimately, the market itself will perish.

A deeper ethical crisis lies in the incentive mechanisms. If a U.S. military commander can profit by shorting a country's regime and then launching an attack, this constitutes a serious moral hazard. The contract for "Maduro's Downfall" bears a striking resemblance to the "assassination of politics" predicted by cyberpunk writer Jim Bell—crowdfunding a bounty by predicting someone's death.

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