Fraudsters may be using platforms such as Polymarket and Kalshi as online money laundering sites.
Prediction markets have moved into the mainstream, turning elections, sports, and breaking news into tradable bets. But the same systems are also reportedly attracting fraud on a massive scale.
Consumers who have never even logged into one of these sites may end up paying for a loss, while all winnings are siphoned into the fraudsters' own alternative payment methods. This raises questions about whether fast-growing gambling platforms can maintain basic financial safeguards.
Here's what to know
In February, a payment processor working with Polymarket detected a surge in bets backed by stolen debit card details, according to Futurism, which cited The Wall Street Journal.
It reported that criminals used this tactic in attempts to take upward of $10 million. The scheme involved using stolen card information to place wagers and then cashing out winnings through payment methods the fraudsters controlled.
At one point, the third-party processor reportedly declined over 80% of incoming transactions as fraudulent, compared with an industry norm of about 1%.
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There was reported tension inside Polymarket, with compliance employees alarmed by the activity and CEO Shayne Coplan portrayed as pressing ahead with growth despite the risks.
More background
The tension comes as prediction markets and other online betting platforms rapidly expand. Competition is high, and growth is exponential, but oversight may be lacking.
When fraud enters the picture, the damage does not stop with the platform itself. Consumers whose card information is stolen can face frozen accounts, disputed charges, missed bill payments, and lengthy cleanup efforts with banks and payment providers.
If payment systems are flooded with suspicious activity, legitimate users may run into declined payments, stricter verification checks, or slower withdrawals.
To underscore the unusual nature of the situation, Joe Konizeski, a former attorney for the Commodity Futures Trading Commission, told the Journal, "In the regulated space, this kind of thing does not happen."
What's being done?
The most tangible response appears to have come from the third-party payment processor's side rather than the platforms themselves. The processor reportedly began rejecting suspicious transactions at a very high rate, a move that likely saved a large amount of money for would-be fraud victims.
This may increase pressure for better compliance systems and identity checks as well as closer scrutiny from regulators and financial partners. For prediction markets trying to build legitimacy, anti-fraud controls should not be a back-office concern since they are central to whether customers and institutions trust the business.
Monitoring bank accounts, enabling alerts for debit card transactions, disputing unfamiliar charges, and using payment methods with fraud protections can reduce the harm if your card information is stolen. Some credit card companies also use virtual credit cards, which protect your card and allow for advanced tracking of the origin of the fraud, assuming you use a different virtual card for each company.
"You have adults who handle customer funds and make sure they're sourced appropriately and handled appropriately," Konizeski told the Journal, per Futurism.
Where can I learn more?
These stories look at related issues around crypto's rapid growth, oversight, and the fallout that can follow.
• In Malaysia, illegal crypto mining operations allegedly drained $1.1 billion from a state utility.
• Former SEC official Thomas Fischer warned the crypto craze can unravel quickly for investors.
• Pepenode says its new mining approach could reshape how meme-coin projects raise money.
• Neironix says cryptocurrency's unexpected fate now includes sustainability efforts and broader practical uses.
• In Texas, residents said a crypto mining facility brought danger and pressure on local officials.
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