US probe puts prediction market identity controls under the spotlight

The U.S. House Committee on Oversight and Government Reform has opened an inquiry into Polymarket and Kalshi, pressing the two prediction market companies for records on identity verification, geographic restrictions, suspicious trading, and the handling of markets tied to military operations, geopolitical events, and political contests.

Letters sent to the companies by chairman James Comer mark one of the clearest signs yet that Congress is beginning to treat prediction markets not merely as a financial technology novelty, but as a possible national security, market integrity, and identity-verification problem.

The inquiry comes as Polymarket has reportedly begun rolling out new identity-verification measures after years in which users could register with little more than an email address.

The committee’s letters to Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour frame the central concern bluntly, saying online prediction markets may be vulnerable to insider trading by users who have access to nonpublic, market-moving information.

In Polymarket’s case, the committee said it is examining whether company safeguards are adequate to prevent users from accessing offshore sites to evade U.S. regulatory requirements, and whether the company has sufficient systems to identify domestic and international users, enforce geographic restrictions, and detect anomalous trading activity.

The inquiry is rooted partly in the April 24 federal indictment of U.S. Army Master Sergeant Gannon Ken Van Dyke, who is alleged to have used classified information related to Operation Absolute Resolve to capture Venezuelan President Nicolás Maduro.

Van Dyke is alleged to have placed wagers that generated more than $409,000 in personal gain on Polymarket.

The lawmaker’s letter also points to reporting that more than 80 Polymarket users placed bets with suspicious characteristics, including trades made hours before unannounced U.S. and Israeli military operations against Iran.

For Congress, the issue is not simply whether a trader guessed correctly. It is whether prediction markets have created a new venue where classified information, political insider knowledge, or other nonpublic information can be rapidly monetized through event contracts.

That concern is especially acute when the underlying events involve military operations, foreign policy, elections, or actions by government officials.

Comer requested Polymarket documents dating back to January 1, 2024, including records on the company’s identity verification technologies, vendors, KYC procedures, differences between domestic and international account requirements, and any changes to access-control procedures.

Comey also seeks records on how Polymarket detects and reports suspicious trading, including algorithmic tools or thresholds used to flag trades that may reflect use of classified or nonpublic information.

The committee also asked Polymarket for records tied to event contracts involving U.S. or Israeli military operations in Iran, Operation Absolute Resolve, Maduro-related markets, how the company collects and uses personal data, and whether current or former officers, employees, advisers, or directors have held or applied for U.S. government security clearances.

That last request underscores the national security dimension of the inquiry. Comey is asking not only how users are screened, but whether people close to the platform itself may have access to sensitive government information.

Kalshi received a parallel letter, but with a slightly different regulatory backdrop. Unlike Polymarket, Kalshi has operated as a Commodity Futures Trading Commission-designated contract market since November 2020.

The committee acknowledged that status but said Kalshi’s October 2025 expansion into more than 140 countries raises questions about whether international users are subject to identity-verification and insider trading rules equivalent to those applied domestically.

The Kalshi letter also cites political market concerns. According to the committee, former California gubernatorial candidate Kyle Langford placed a $200 bet on Kalshi on his own race in May 2025, and three additional politicians later placed bets on the platform related to their own races.

The committee said that pattern, combined with the Van Dyke indictment and suspicious trading reported on Polymarket, suggests congressional action may be necessary.

Like the Polymarket request, the Kalshi letter seeks documents on KYC procedures, anomalous trading detection, suspicious activity referrals, event contracts tied to military operations, personal data practices, compliance with Commodity Futures Trading Commission (CFTC) rules, internal legal assessments, and any company personnel or advisers with U.S. government security clearances.

The committee gave both companies until June 5 to provide records.

The congressional pressure coincides with a reported shift inside Polymarket, which has begun implementing new identity-verification measures and stricter access controls in response to pressure from international regulators and Congress over illegal gambling concerns and users from sanctioned countries.

The company has reportedly created an online portal where users can submit passports, driver’s licenses, proof of residence, and other identifying information.

The forms reportedly ask users to demonstrate they are not residents of prohibited regions, places where governments have barred Polymarket from operating, or countries subject to U.S. sanctions, including Russia, North Korea, and Cuba.

Polymarket is also reportedly asking business users, such as developers of trading applications connected to its platform, about their investors and location.

That is a significant turn for a platform whose appeal has long been tied to speed, crypto-native access, and relatively low-friction participation.

Polymarket is trying to encourage users to provide identifying information by offering faster trading speeds, but the move has drawn criticism from users who argue that mandatory KYC could alienate the platform’s core base.

The compliance shift reflects a larger identity problem now confronting prediction markets. These platforms depend on liquidity, scale, and fast participation, but the same characteristics that make them attractive to traders can make them difficult to police.

Geographic restrictions can be evaded with virtual private networks. Crypto rails can obscure user behavior. International access can complicate the question of which country’s rules apply. And event contracts based on military, diplomatic, or political developments can create incentives for people with privileged information to turn that knowledge into profit.

The House inquiry also lands amid a widening jurisdictional fight over whether prediction markets should be treated primarily as federally regulated commodities markets or as gambling operations subject to state restrictions.

Minnesota recently became the first state to ban the industry from operating within its borders. In response, CFTC filed suit on May 19 seeking a preliminary injunction to stop the state’s new prediction market ban from taking effect on August 1, escalating the conflict between state regulators and federal officials.

Kalshi has also filed its own suit seeking to stop enforcement of the ban.

The central question now is whether prediction markets can build compliance systems strong enough to satisfy regulators without destroying the user experience that fueled their growth.

For Congress, the answer may determine whether these platforms remain a niche financial technology, become a mainstream regulated market, or face new limits on the kinds of events they can list.

Article Topics

digital identity  |  gambling  |  identity verification  |  KYC  |  regulation  |  U.S. Government