ESMA Flags Insider Trading in Prediction Markets Covering Bitcoin (BTC) and Sports

Inside-Trading Cases Cited by ESMA

Prediction markets have drawn a formal warning from Europe's top securities watchdog, which says the sector is rife with insider trading and hard to police after the fact. The European Securities and Markets Authority (ESMA) gave event-contract platforms their own chapter in its latest risk monitor, and the cases it catalogs are striking. Freshly created wallets netted $1.2 million on Polymarket hours before February's strike on Iran; by May, on-chain analysis had traced nine linked accounts to $2.4 million of Iran bets that won 98% of the time. A U.S. Army master sergeant was charged over $400,000 in Polymarket profits tied to the capture of Venezuelan president Nicolás Maduro, and in April, suspected tampering with the weather sensors used to settle Polymarket contracts prompted Météo-France to file a police complaint. ESMA describes platform responses as “largely reactive,” typically arriving only after profits are banked; Polymarket chief legal officer Neal Kumar drew the opposite lesson from the Maduro case, arguing participants “will be found.” Why has Europe seen so little of the sector? Event contracts can qualify as financial instruments under MiFID II, fall under MiCA, or count as gambling under national law — and where they are treated as derivatives, national rules mirroring ESMA's binary options intervention bar selling them to retail investors entirely. Kalshi and Polymarket restrict users in some EU member states but not all, and ESMA says it is unclear why coverage is incomplete; VPN bans show uncertain practical effectiveness, while Malta alone is drafting a framework. Volumes have since outrun the regulator's dataset: ESMA's chart stops at $8.8 billion quarterly for Kalshi (November 2025) and $12 billion for Polymarket (January 2026), yet combined monthly volume reached $44.8 billion by June, with Kalshi taking $31.5 billion. Sports make up 73% of Kalshi's volume, while Polymarket splits across politics, sports and crypto — with Bitcoin (BTC) price contracts among the crypto markets. Analyses cited in the document found 67% of Polymarket gains concentrated in 0.1% of accounts, and most users lose money.

World's Launch on Solana

Even as the EU regulator catalogs harms, the category itself is expanding into a new architectural model. On September 9, World opened its standalone platform at world.xyz to a waitlist exceeding one million users, after operating inside the Phantom wallet since the summer; the site briefly buckled under launch-day traffic before returning. More than 150,000 markets have been created since the Phantom integration went live, spanning sports, crypto, politics, finance, economics and culture. The opening lineup covers every NFL regular-season game, seven soccer leagues, Formula 1, binary contracts on the 2026 U.S. midterm elections and Federal Reserve policy decisions, with equity, commodity and weather markets planned. Mechanically this is standard binary contract trading: yes and no contracts priced between zero and one dollar, with the verified outcome settling the winning side at a dollar. Three properties set it apart. The protocol is non-custodial and holds no customer funds; orders route to liquidity providers on Solana — the same chain hosting the Jupiter (JUP) aggregator and the broader Solana DEX stack; and settlement occurs in CASH, the dollar-backed stablecoin used inside Phantom, with winning positions redeemed automatically in the wallet. No brokerage account and no exchange registration are required. Resolution is the real departure: Chainlink Data Streams and the Chainlink Runtime Environment settle each contract the moment a game ends or a defined event hits its deadline — no human panel, no token-holder vote, no dispute window. That makes World a third settlement model alongside Kalshi's rulebook resolution by a regulated operator and Polymarket's optimistic oracle with token-holder voting. Notably, the launch materials address no geographic restriction, even though the listed contract categories — sports event contracts, election contracts, Fed decisions — face active litigation in the United States from state gaming regulators, California tribes at the Ninth Circuit, and a bill that would ban sports contracts outright. Readers tracking the market in real time can follow live spot and futures prices on Binance.

The Rulebook Versus the Code

The common thread across both developments is resolution integrity. The ESMA document we reviewed is a risk assessment rather than a binding rule: it flags conduct and supervisory gaps for national competent authorities policing firms under MiFID II, and the retail distribution ban it references rests on existing national intervention measures, not on the monitor itself. Against that stands World's DeFi app posture — no operator holding funds, no registered intermediary, no identity gate — which removes precisely the categories regulators typically reach. Automated settlement genuinely fixes contested-outcome risk for objective events such as a Bitcoin price at a stated timestamp. The untested scenario is the first genuinely disputed settlement on a feed-based platform with no panel, no vote and nobody to appeal to — the moment that will reveal whether legacy enforcement tools can reach code.