Predictive Markets Are Problematic...

0:00Online betting markets are probably getting people killed. I'm Nick Espinoza, your chief security fanatic, and let's dive in. Now, this is some really interesting news, and there was a pretty solid write-up by Sahil Dasai of the Atlantic, and I want to dive into this, because if you didn't know, hours before Ayatollah Kamani's compound in Tehran was basically bombed out of existence, an account under the username Maga Maiman bet about $20,000 US that the Supreme Leader would no longer be in power by the end of March. Polymarket, which is the predictive market that this person used, placed the odds at about 14%, which then generated $120,000 in profit for Maga Maiman. So if you've been paying attention to the events taking place in this war with Iran, you may have noticed that the Iranian government was caught off guard by the timing of the American

1:00attack. But on Polymarket, there were tons of warning signs that pointed to this impending attack. According to a New York Times analysis, the day before the war started, 150 users bet at least $1,000 that the US would strike Iran within 24 hours. Well then, very few people on the platform were betting that kind of money on an immediate attack. And this isn't an isolated incident. Back in January, somebody on Polymarket made a series of suspiciously well-timed bets right before the US attack of Venezuela and deposed the authoritarian leader, Nicolas Maduro. By the time Maduro was flown to New York, the Polymarket user had earned more than $400,000. Is this a coincidence? Or maybe they knew what was happening ahead of time and flipped it for easy money? The thing is, we don't know.

2:00We just don't. Polymarket traders swap crypto, not cash, and so they can conceal their identities through the blockchain. Governments though, not all of them, are taking notice. Now in February, Israel charged a military reservist for allegedly using classified information to make unspecified bets on Polymarket. And for the record, Polymarket's policies and terms forbid illegal activity, which includes insider trading in the United States. However, with anonymity so easy to achieve, Polymarket can exactly police this as users can simply spin up new accounts and new wallets to evade detection. And to be fair, all prediction markets, not just Polymarket, have been essentially dog by accusations of insider trading in markets of all stripe. These bets also run from the benign, such as the user that knew that lady Gaga, Cardi B, and Ricky Martin would make a surprise appearance during the Super Bowl halftime show, but

3:01also that Drake and Travis Scott would not. But it also goes to the more sinister, like betting on war and conflict. And think about it this way. The attacks in Venezuela and Iran, like so many military campaigns, were conducted under the guise of secrecy. If those two countries were watching prediction markets, then that's a national security threat. And we'll talk about that. Because this was a great primer by Sahil Desai of the Atlantic. Go read the rest of what Desai had to say, but I want to dive deeper here. Because something that was not mentioned in Desai's article is simply this. The president's son, Donald Trump Jr., basically joined the advisory board of Polymarket in August of 2025, following a strategic investment from his firm, 1789 Capital. Now to be very clear here, I am not. I repeat, I am not accusing Don Jr. of any wrongdoing. I am not. Cybersecurity is agnostic to politics, but we're not immune from it.

4:03It's just that the optics do not look good for a direct family member of the president of the United States to be involved in a predictive market in any way, shape or form. And so I think there are three major categories of risk at play here. And let's talk about them because I think the first one is the obvious one. Conflicts of interests, possible corruption risks, right? Think about it. The president controls the military operations, the intelligence briefings, classified plannings and all of that. And so a close family member financially connected to a betting platform that allows speculation on basically those types of things creates a direct incentive to basically to monetize privileged information. And so even if Don Jr. has no direct access, and again, I'm not accusing him of anything, this perception alone undermines trust in the government's decision-making. On top of this, the next risk, I think, is potential criminal exposure if inside information

5:04is actually used. Presidential family members often have informal access to high-level discussions, schedules or policy signals, right? We can go back and see, like first ladies often times have been involved. Hillary Clinton was very famously involved in President Bill Clinton's two terms. But betting markets profit from information, a symmetry, meaning the value of the platform increases if somebody has privileged knowledge, right? So that then creates an environment where non-public national security information could essentially be monetized, which brings us to the third risk, which I briefly touched about as did decide in that article, as that the national security risks could essentially influence military decision-making or incentivize violence. I mean, domestic or foreign intelligence services could do things like place-large bets, approach insiders connected to the platform, or even attempt to compromise somebody with access to this information.

6:05This turns the platform like polymarket and the others into a potential intelligence collection channel. That's a huge issue, right? And think about it this way, if somebody close to the president could financially benefit from specific military outcomes, then we all could argue that decisions basically might be financially influenced at the presidential level or adversaries could attempt to financially manipulate markets to create those incentives for those insiders. And that's the thing, because the public has to believe that military decisions are made for national security in our best interests and not for financial speculation or gain. A prediction market linked to the president's family erodes confidence in civilian control of the military. And again, I'm not saying Don Jr. has done anything wrong here. But we cannot ignore the optics of this and the evidence that we have that insider trading or betting is going on on these platforms.

7:07And so that brings us to the actual US federal laws at play here. I did my homework and there are several laws that could be enforced if a worst-case scenario is imagined. So the first one up is the Espionage Act of 1917. That's 18 USC 793, which prohibits the unauthorized transmission of information related to national defense. The sharing of basically classified or sensitive military planning with someone not authorized to receive it is a felony. Violations can basically carry up to 10 years in prison per count. And we have seen people in the military. There's a 22-year-old army, basically army personnel on Discord that was dumping out classified information on Discord to impress his friends. He's in prison right now. So that's obviously a huge thing. On top of it, we have more laws, theft or conversion of government property, 18 USC 641. The courts have treated confidential government information as a quote-unquote thing of value.

8:10And so using that information for personal profit could constitute theft or conversion of government property. There's also disclosure of confidential government information, 18 USC 1905. This law prohibits federal employees from disclosing confidential government information obtained through their work. If information originated from a government official and was passed along, then both parties could face criminal liability. Then there's the classified intelligence disclosure standards, 18 USC 798. That criminalizes the disclosure of classified communications or intelligence information. On top of it, we have the Computer Fraud and Abuse Act, a law passed into law by Congress if somebody accessed restricted government systems who obtained military information and then shared it. That's a crime. Then there are basically the securities and financial fraud. So we have the Securities Exchange Act 10B as well as the SEC rule 10B-5.

9:10And so even though prediction markets are not traditional securities markets, similar principles may actually apply here and new law could be written to amend or include prediction markets as well. Remember, using material non-public information for financial gain constitutes fraud. On top of it, we have laws for just good old fashioned conspiracy, 18 USC 371. So if Don Jr. shared information, again, not saying he is, and another person placed a bet on his behalf, that could constitute a criminal conspiracy to commit fraud or espionage-related offenses. And so there's a lot of legal framework that just doesn't make this a good idea and forget Don Jr. And so even if you look at why anonymous betting on military actions could actually get

10:12people killed. So if somebody profits from a specific military event like a strike and invasion, those kinds of things, they could attempt to encourage or provoke that outcome. So foreign intelligence services or even domestic could just watch betting markets for signals of an upcoming US operation, they could identify unusual bets, and then infer the plans of what would happen. This could allow an adversary of the United States in this case to prepare for defenses, possibly ambush the forces that are at play here. If the bet is that specific, these are things that could actually happen. On top of this large bets also create incentive for bad actors or threat actors to manufacture events. So for example, a tax could be staged to trigger a military response or assassination attempts or cyber incidents could basically be essentially manufactured here. And then there's the insider profits from leaks, right?

11:12Because if an insider does profit from a leak, then adversaries may learn about timelines, targets, troop movements, this could directly endanger soldiers and civilians alike. And we all know that civilians die in war zone. It's literally happening as the United States is bombing Iran and Iran's firing missiles at something like 14 different countries, right? And finally, if policymakers or connected individuals can profit from conflict, then it introduces financial incentives for escalation, meaning if I'm making a half a million dollars of bet, and I have the influence, so let's say, advise the president or somebody else whoever that is to say, hey, we should do more of this because I know that I can say, oh, hey, tomorrow we're going to bomb this city, this town, this whatever. That's a huge issue. And remember, this is done through cryptocurrency. It is anonymous. It's very hard to trace. And so think about it. Even the appearance of this risk can destabilize international relations.

12:14And the bottom line here is simply this, even if no laws were broken and I am not accusing anybody in the administration of doing anything, a president's close family member participating in a platform that allows anonymous betting on military decisions, creates serious, ethical, national security and legal risks, primarily because it links privileged access to government information with financial speculation on war and security outcomes. This is a huge, huge thing and I hate to say it, but I think we've probably seen the death of somebody online thanks to these bets and these markets. It's not a good look and I really do think that this needs to be investigated and again, I am not accusing anybody of anything, but we've seen bets that make it look like insiders are betting, whoever those insiders are, and that's a huge problem for our national security and our stability and definitely the optics as well.

13:15And please like, share, follow me here on Facebook and Twitter at NickAESP and please for free to subscribe to me at YouTube as well and as always stay safe, stay online and please, please, please attempt to say private, secure and informed. Take care. Take care. Take care. Take care. Take care. Take care. Take care.