The Commodity Futures Trading Commission is deploying AI-powered surveillance to combat insider trading in prediction markets, particularly targeting US citizens accessing offshore platforms like Polymarket via VPNs. CFTC chairman Michael Selig confirms the agency is staffing up and leveraging automation to analyze trading patterns, flag potential manipulation, and guide investigations.

The CFTC claims authority to pursue enforcement actions against offshore platforms under the 2010 Dodd-Frank Act, though Selig acknowledges these cases present legal challenges. "We use it in extreme circumstances," he noted regarding extraterritorial jurisdiction. The agency has referred some cases to foreign regulators when appropriate.

Prediction market operators are responding to regulatory pressure by implementing their own safeguards. Kalashi has suspended customers for market manipulation, while Polymarket partnered with Chainalysis after facing backlash. With only one arrest made to date—a US Army soldier trading on Polymarket—the CFTC's crackdown signals increased scrutiny of prediction markets.