Prediction Markets Face Renewed Insider Trading Scrutiny After Super Bowl Fraternity Rumors
College betting rumors tied to Jeff Bezos and Mark Wahlberg have reignited concerns about insider trading on prediction market platforms such as Kalshi and Polymarket.
Prediction markets are facing renewed scrutiny over possible insider trading after reports that college students may have used insider information and rumors to profit from Super Bowl wagers.
A recent Wall Street Journal (WSJ) article described how students gathered information about celebrity attendance at the Super Bowl and placed trades on platforms like Kalshi, raising fresh questions about how privileged information can be exploited in prediction markets.
Campus Rumors Move Super Bowl Markets
One example involved bets on whether Amazon founder Jeff Bezos would attend the Super Bowl.
According to the report, students at the University of Miami’s Sigma Alpha Epsilon fraternity, where Evan Whitesell — Bezos’ stepson — is a member, began betting that the Amazon founder would not attend.
As the information spread through group chats and alumni networks, traders began buying contracts predicting that Bezos would not appear at the game. The probability of his attendance on Kalshi reportedly fell from around 70% to roughly 30%.
Two people who placed bets said the source of the information was Whitesell. However, neither said they heard that directly from him.
While some University of Miami students made a profit, others who bet on actor Mark Wahlberg attending were not so lucky. Based on false rumors circulating in group chats and on social media, the market generated more than $24 million in trading volume. However, the actor ultimately did not show up.
The rumor began at Clemson University fraternities, where Wahlberg’s daughter, Ella, is a student. WSJ cited a member of the Clemson chapter of Delta Chi, who claimed that Ella had confirmed the information in text messages. She allegedly boasted that the bet was “literally free money.”
The NCAA has warned about the widespread use of prediction markets on college campuses. In January, NCAA President Charlie Baker sent a letter to Commodity Futures Trading Commission Chair Mike Selig. He urged the agency to prevent prediction markets from offering markets on collegiate sporting events until it can implement “a more robust” regulatory framework.
Kalshi told the WSJ that it is investigating the Bezos and Wahlberg markets for possible insider trading.
Still, the incidents illustrate how prediction markets can be influenced by private information or unverified social media rumors.
Insider Trading Questions Surround Prediction Markets
The college betting rumours add to the broader discussion on insider trading surrounding platforms like Kalshi and Polymarket.
As prediction markets allow users to trade contracts tied to the probability of real-world events, critics argue they create opportunities for insider trading.
Several recent markets have drawn particular scrutiny.
Less than a week ago, reports emerged that several accounts reportedly made around $1.2 million in profits on Polymarket after placing bets predicting U.S. military action against Iran. Most of the trades were reportedly placed hours before the strikes.
Another major geopolitical event also drew criticism. In January, a trader reportedly earned over $400,000 on Polymarket after placing multiple bets that Venezuelan leader Nicolás Maduro would be removed from power. The trader placed the bets shortly before reports emerged of an operation targeting the Venezuelan leader.
While Polymarket has stayed mostly quiet, Kalshi has attempted to distance itself from insider trading. In January, the Coalition for Prediction Markets, in which Kalshi is a member and Polymarket is not, took out a full-page ad in the Washington Post to counter accusations that the platforms encourage insider trading.
Then, in late February, Kalshi announced that it had closed two insider trading cases. That marked the first time any major prediction market platform has publicly disclosed investigations into insider trading.
Still, experts note that enforcement remains challenging.
Prediction markets operate under federal derivatives rules rather than state gambling regulations, creating what some policymakers describe as a regulatory gray area.
Lawmakers Move to Address Insider Risks
Growing concerns about insider information are attracting attention in Washington.
U.S. Senators Jeff Merkley and Amy Klobuchar recently launched a legislative effort to prevent federal officials from trading in prediction markets. The proposal seeks to ensure that government officials cannot use sensitive or non-public information to profit from event-based trading.
The senators said the effort aims to “prevent government officials…from engaging in prediction markets” where insider information exploitation is possible.
Separately, Sen. Chris Murphy posted on X on Feb. 28 that he’s also working on a similar proposal. While not specifically targeting insider trading, multiple states have also introduced legislation to limit prediction markets.
The proposals come amid growing debate about whether prediction markets blur the line between financial trading and gambling.
https://www.gamblinginsider.com/news/116436/prediction-markets-insider-trading-super-bowl-rumors