WASHINGTON, DC — The Commodity Futures Trading Commission is expanding staff and deploying artificial intelligence tools to identify United States traders using virtual private networks to access offshore prediction markets blocked stateside, including Polymarket's crypto-based platform. CFTC Chairman Michael Selig told Congress the agency is pursuing hundreds to thousands of insider trading tips and is prepared to bring enforcement actions against violators.

Selig described the agency's use of automation to analyze trading patterns and flag potential manipulation. "You've got so much data. When we feed it into AI, we get really great information. It can help us understand things, like where we might want to investigate, or when we might need to send a subpoena to a trader," he said. "We're going to find them, and we're going to bring actions."

The commission, which oversees prediction markets, is searching for suspicious behavior by U.S.-based users of platforms that are not regulated or licensed within the country. Polymarket's crypto-based platform is technically offshore.

The CFTC uses proprietary in-house surveillance systems, third-party blockchain tracing tools such as Chainalysis for crypto platforms, and market abuse detection software including Nasdaq Smarts for centralized markets. Selig said the agency is surveilling markets on a global basis and will exert extraterritorial jurisdiction to enforce its laws beyond traditional boundaries in extreme circumstances on a case-by-case basis. He said the 2010 Dodd-Frank Act gives the commission more authority over foreign swap activities that impact the United States, and that the agency works with regulators from other countries and refers cases when appropriate. He said the CFTC will identify wrongdoers regardless of their size.

"The value Chainalysis adds for our customers, including Polymarket and the CFTC, is organizing the data and enriching it with the attributions and insights we've accumulated over years in the space," Chainalysis spokesperson Maddie Kenney said. In April, Polymarket announced a partnership with Chainalysis to crack down on market manipulation on its offshore platform. Polymarket updated its market integrity rules this spring and announced a partnership with Palantir for its U.S.-based sports markets. U.S.-based exchange Kalshi has suspended and penalized customers flagged for insider trading and market manipulation.

At the beginning of April, seven members of Congress asked the CFTC in a letter to investigate overseas markets offering war-themed events contracts, arguing the commission had the authority and responsibility to curb insider trading on military action, which they called "morally obscene." On April 23, federal agents arrested a U.S. Army Special Forces soldier for trades made on Polymarket last year tied to the capture of former Venezuelan leader Nicolas Maduro. After the arrest, Polymarket said it had flagged the trade to the government.