Crypto: Only Kyc Can Stop Insider Trading On Prediction Markets, Messari Says
Insider trading is hard to curb on non-KYC prediction markets, but even identity checks do not fully eliminate abuse, according to Messari’s Austin Weiler.
Concerns over insider trading on prediction markets have intensified after a series of high-profile bets on geopolitical events, prompting fresh questions over whether it’s even feasible to curb such practices in the growing industry sector.
Preventing insider trading is realistically possible only on prediction markets applying Know Your Customer (KYC) measures, according to Austin Weiler, a research analyst at the blockchain intelligence firm Messari.
“For KYC’d platforms, the most effective mechanism is to restrict access upfront for users to specific markets,” Weiler told Cointelegraph, adding that state actors could be restricted from political or geopolitical markets.
“This does not fully eliminate abuse, since insiders can still share information with third parties, but it adds an important obstacle and raises enforcement standards,” he noted.
For non-KYC, or fully onchain prediction markets, enforcement is extremely challenging and, in some cases, “nearly impossible,” Weiler said.
When wallets are not linked to real-world identities, there is no reliable way to identify traders or determine whether they have access to material non-public information (MPNI), he said.
“Prediction markets can attempt to monitor unusual trading behavior, cap trade sizes, or slow trading during sensitive geopolitical periods. However, these measures are easily bypassed,” Weiler said, adding:
At the time of writing, KYC requirements vary widely across established prediction platforms such as Kalshi and Polymarket, while decentralized alternatives do not appear to require identity checks, or cannot technically support them.
Kalshi enforces KYC requirements as part of its regulated model under the authority of the US Commodity Futures Trading Commission. On its sign-up page, Kalshi states that it requires basic personal information from users and may request further verification using an identification document.
Source: CoinTelegraph
