The Israeli military uses Polymarket to catch insiders. Why is the prediction market becoming mainstream?

Once considered a niche, hardcore gaming prediction market, it fully entered the mainstream in early 2026. On one hand, it has become a national security tool: the Israeli military successfully used Polymarket to apprehend an “insider” leaking military secrets; on the other hand, it rapidly penetrated traditional finance and sports industries: compliance giant Kalshi not only approached $10 billion in monthly trading volume but also began offering institutional sports risk hedging services. From battlefield intelligence to team bonuses, prediction markets are reshaping our understanding of the “value of information.”

The “Hard Evidence” in Intelligence: The Israeli Insider on Polymarket

The unfair advantage brought by insider information has always been a controversial point for decentralized prediction platforms like Polymarket. This time, the controversy directly escalated into criminal charges.

On February 12, the Tel Aviv District Court filed charges against an Israeli civilian and a reserve military personnel, accusing them of using classified military information to profit from bets on Polymarket. This is the first publicly confirmed arrest involving the use of military secrets in prediction market trading. According to joint investigations by Israel’s National Security Agency, these reservists directly monetized sensitive information they accessed in their duties—including the timing of military operations—by placing bets.

Although specific account details are restricted by law and not fully disclosed, the community had already identified an anomalous account named “Rundeep.” Since June 2025, this user achieved a 100% win rate across six predictions related to Israeli military actions, five of which were placed when the probability was below 50%, ultimately earning over $150,000.

Stanford Law Professor and former SEC Commissioner Joseph Grundfest commented, “Such bets put the military at greater risk because they hint at what might happen next to the enemy.” Although Polymarket’s overseas exchanges are not directly governed by U.S. authorities, this incident serves as a warning worldwide: on unlicensed blockchain prediction markets, the value of intelligence can be monetized more quickly.

New Institutional Battlefield: Kalshi and Commercial Sports Risk Hedging

If the Polymarket incident demonstrated the “gray claws” of prediction markets, Kalshi’s progress showcases their highly compliant and commercialized “golden wings.”

Also on February 12, Kalshi CEO Tarek Mansour announced a partnership with brokerage firm Game Point Capital to officially enter the institutional sports risk hedging space. Game Point Capital issues hundreds of millions of dollars in sports insurance annually, focusing on performance bonuses for teams and players. Through collaboration with Kalshi, teams can hedge against large bonus payouts triggered by playoff appearances or championship wins.

This is more than betting; it’s sophisticated financial engineering. Mansour revealed that last week, Game Point executed its first hedge trades for two NBA teams on Kalshi. One hedge contract for playoff bonuses was priced at 6% on Kalshi, compared to 12-13% in the over-the-counter market; another for advancing to the second round was priced at only 2% on the exchange, far below the 7-8% OTC quote. “Exchanges are a better choice because they can expand liquidity and foster competition,” Mansour said.

This efficiency advantage is reflected in the data. Kalshi’s trading volume in January reached $9.6 billion, a 45% increase from $6.6 billion in December 2025. During the recent Super Bowl weekend, the platform’s trading volume exceeded $1 billion. Sensor Tower data shows that Kalshi’s single-day downloads during the Super Bowl weekend hit a record high, with advertising spending during the NFL season even 35% higher than traditional giant DraftKings.

Explosive Growth and Regulatory Tug-of-War

The overall industry boom is ongoing. According to the “Skynet Prediction Market Report” by security firm CertiK, global prediction market trading volume surged from approximately $15.8 billion in 2024 to $63.5 billion in 2025, a fourfold increase. Kalshi, Polymarket, and Opinion together account for over 95% of global trading volume, forming a three-way dominance.

However, behind the prosperity, regulatory battles are intensifying. U.S. SEC Chair Paul Atkins stated at a hearing on February 12 that prediction markets have become a “major concern” for regulators, with overlapping jurisdiction between the SEC and CFTC. CFTC Chair Michael Selig also emphasized ensuring that markets do not stagnate or be pushed overseas.

Responses vary across states. Kalshi is appealing a Nevada ruling and faces litigation in Massachusetts; Polymarket has also sued Massachusetts in federal court, asserting that CFTC jurisdiction should take precedence over state gambling laws. Meanwhile, Hong Kong, Dubai, and Singapore are actively establishing clear frameworks, aiming to incorporate prediction markets into compliant financial products.

Summary

From Israel’s military using Polymarket to trace leaks in a “counter-espionage” battle, to Kalshi helping NBA teams lock in bonus risk with a “financial armor,” prediction markets are rapidly shedding their “gambling” label and evolving into a new infrastructure for pricing uncertainty.

CertiK summarized in its report that platforms capable of long-term survival must simultaneously maintain liquidity across multiple jurisdictions, build secure infrastructure to attract institutional capital, and reduce reliance on incentivized trading volumes. For participants focusing on this track on platforms like Gate, security and compliance have become more important long-term indicators than trading volume.

With the Trump family’s capital involved in both Polymarket and Kalshi, and Truth Social planning to launch its own prediction market service, the narrative in 2026 will be less about “who wins the election” and more about “who defines the value of uncertainty.”