In Washington, access to nonpublic information that can move markets is commonplace. A government official may know in advance what a president plans to announce, whether a policy shift is imminent, or which officials will attend a high-profile event. As prediction markets increasingly list contracts tied to political decisions and government activity, that inside information can become directly tradable.

The problem is already surfacing on Kalshi, one of the industry's largest platforms and the first prediction market exchange fully regulated by the Commodity Futures Trading Commission. The company tells Fortune it has spent years building surveillance systems to identify suspicious trading and has begun aggressively referring suspected misconduct to federal authorities.

"Being federally regulated means that Kalshi bans market manipulation, insider trading, has limits on the types of markets it lists… and publicly reports all trades to the CFTC daily," Laura Frank, a Kalshi spokesperson, told Fortune. "We have also spent years building custom prediction market trade surveillance and enforcement systems that are similar to those used in the stock market."

Kalshi's terms of service and exchange rules explicitly prohibit market manipulation and insider trading. All users must complete identity verification before trading, and the company says its monitoring systems continuously scan for potential violations. The regulatory framework Kalshi operates under is distinct from traditional securities law—event contracts fall under CFTC jurisdiction—meaning enforcement mechanisms for insider trading in this space are still being tested in practice.

Earlier this year, those systems flagged trades by former Congressman George Santos connected to markets tied to the State of the Union address. Kalshi says it investigated and referred the matter to the Commodity Futures Trading Commission, providing evidence to authorities. The company is also pursuing its own enforcement action against Santos for violating exchange rules. If monetary penalties are recovered, Kalshi told Fortune it will work to reimburse affected traders.

Federal authorities have separately examined the trading activity of Gabriel Perez, a former White House teleprompter operator. Officials investigated whether Perez used advance knowledge of President Trump's prepared remarks to trade on Kalshi markets tied to specific words or topics expected to appear in presidential speeches.

A study by Columbia Law professor Joshua Mitts and University of Haifa professor of law Moran Ofir found that bets on prediction markets achieved a nearly 70% win rate—"well in excess of chance"—and estimated that traders earned $143 million in profit. The findings drew comparisons to longstanding concerns about informed trading in traditional financial markets, where federal insider-trading laws have been enforced for decades.

While prediction market platforms have firmly opposed allowing insider trading, Robin Hanson, a professor at George Mason University and a prediction market pioneer, argues that insider trading serves a necessary function. He previously told Fortune that "you want them trading," referring to insiders, because "the purpose of the market is to inform decisions."

Amid this debate, the Trump family is deepening its involvement in the prediction market industry, which saw explosive growth during the 2024 election cycle as platforms like Polymarket processed billions in wagers on political outcomes.

President Donald Trump's media company, Trump Media & Technology Group, is developing TruthPredict, a prediction market that would allow users to trade contracts tied to major events and milestones. Concurrently, the company launched Truth API, a premium service offering Wall Street rapid, machine-readable access to posts on Truth Social—including Trump's own—potentially enabling traders to react to market-moving information seconds before it reaches the general public.

The combination is creating an unusual financial ecosystem around the presidency: Trump's public statements can move markets, investors can pay for faster access to those statements, and a Trump-affiliated company is building a platform to wager on political and economic outcomes.

Trump's family is already deeply embedded in the prediction market industry. Donald Trump Jr. serves as a paid strategic advisor to Kalshi, while his venture capital firm 1789 Capital invested in rival platform Polymarket. Trump Jr. also joined Polymarket's advisory board last year. That places the president's eldest son in relationships with both of the industry's largest prediction market companies even as his father develops a competing platform. Polymarket, which settled with the CFTC in 2022 over allegations it offered unregistered derivatives, previously blocked U.S. users but has been working toward a path back into the American market.

There is no public evidence that Trump Jr. has used privileged government information to trade on either platform. Representatives for Donald Trump Jr.'s team and Trump Media & Technology Group did not immediately respond to a request for comment.

This story was originally featured on Fortune.com.