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In the aftermath of the Venezuelan invasion, the blockchain analytics firm Lookonchain identified three digital wallets that collectively earned $630,484 on Polymarket by betting on Maduro's removal. The bets were placed hours before his arrest. The wallets were created and pre-funded just a few days earlier.
So how did they do?
This appears to be insider trading, but Polymarket is not a securities exchange. Its contracts are event-based derivatives (closer to swaps or futures), which means the SEC insider-trading doctrine does not apply. If someone says, “This is insider trading,” a lawyer would respond, “Not technically.”
So does that mean it's legal?
It depends on who placed the bets and how they obtained the information. If the bettors were U.S. officials, government contractors, intelligence or military personnel, Federal law-enforcement personnel, or, frankly, anyone subject to secrecy obligations, many Federal statutes could apply.
In earlier eras, we could feel confident that the FBI and DOJ would get to the bottom of it. And if Federal statutes were violated, successful prosecutions would follow. But this FBI and this Justice Department are designed to protect government insiders, so all bets are off.