For most of the past year, it seemed prediction markets had ushered in a new era of financial mischief. On Polymarket, traders made fortunes from bets on geopolitical events that seemed suspiciously timed. Yet, for all the scandal, it wasn’t clear if the US government would take action against these flagrant bad actors, thanks to the platform’s offshore crypto status.

Now, however, the Commodity Futures Trading Commission (CFTC) is stepping up its game. Chairman Michael Selig has announced that they are closely monitoring traders within the United States who use virtual private networks to access Polymarket and other offshore platforms, which are blocked in the US. “We’re going to find them, and we’re going to bring actions,” he said.

To meet this challenge, the CFTC is ramping up its workforce and embracing automation. This includes AI tools that analyse trading patterns and flag suspicious behaviour. With so much data available, Selig believes they can use AI to identify potential investigations or when a trader might need to be subpoenaed for more information.

Alongside in-house surveillance systems, the CFTC’s arsenal also includes third-party blockchain tracing tools like Chainalysis for crypto platforms and market abuse detection software such as Nasdaq Smarts. However, the agency was vague about which specific AI tools it uses and declined to provide further details.