Israel accuses two of using military secrets to place Polymarket bets

TEL AVIV – In a case that starkly illuminates the collision of digital finance, classified intelligence, and national security, Israeli authorities have charged two individuals with using state secrets to place bets on the controversial prediction market platform, Polymarket. The arrests mark a watershed moment, representing the first publicly confirmed instance of individuals facing criminal charges for allegedly weaponizing military intelligence for financial gain in the burgeoning world of online wagering.

The indictments, announced Thursday by officials in Tel Aviv, send a chilling message to governments and militaries worldwide about a novel and insidious threat emerging from the unregulated corners of the internet.

The Charges in Israel

Israeli prosecutors have indicted a civilian and a military reservist on serious charges, including bribery and obstruction of justice. An undisclosed number of other individuals have also been arrested in connection with the investigation.

The move follows weeks of speculation after Israeli media outlets, including the public broadcaster Kan News, reported that security agencies were probing whether military personnel were monetizing classified information about future operations.

• The Investigation: Authorities were reportedly examining bets placed on Polymarket related to a potential Israeli strike on Iran in June 2025, a market that gained traction during a 12-day conflict between the two nations.
• The Accusations: While the specific bets and the names of the accused remain sealed, the core allegation is that individuals with access to highly sensitive military plans used that foreknowledge to place wagers on Polymarket, seeking to profit from events they knew were being planned.

Polymarket, which is operated overseas, did not return a request for comment on the matter.

Why It Matters: A New Frontier for Insider Trading

The case thrusts the shadowy world of prediction markets into the global spotlight, raising urgent questions about regulation, enforcement, and the potential for abuse. These platforms allow users to bet, often with large sums, on the outcome of future events—from election results to corporate mergers and, controversially, military conflicts.

This is not the first time Polymarket has been at the center of an insider trading debate.

• A Precedent: In January, a trader on the platform famously turned a $32,000 bet into a $400,000 profit by correctly predicting that the U.S. would topple Venezuelan leader Nicolás Maduro just before the operation became public.
• Official Silence: That trade sparked intense discussion about the use of non-public information on the platform, but U.S. authorities have remained silent on whether it constituted a crime or was simply a remarkably prescient wager.

The Israeli arrests, however, move the issue from theoretical debate to concrete criminal prosecution, setting a new global precedent.

A Divided Market: Polymarket vs. Kalshi

The incident underscores the stark differences within the prediction market industry, particularly between its two dominant players: Polymarket and Kalshi. Their opposing operational and regulatory philosophies create a clear divide between a regulated market and a "Wild West" alternative.

The Regulatory Divide

Kalshi, a U.S.-based platform, operates under the strict oversight of the Commodity Futures Trading Commission (CFTC). This subjects it to American laws and consumer protections.

• Kalshi's Model: Trades are primarily conducted in U.S. dollars, and the CFTC explicitly prohibits markets based on events related to war, terrorism, and assassinations.

Polymarket, by contrast, operates an overseas exchange, placing it largely outside the jurisdiction of U.S. regulators. This has allowed it to become a hub for more controversial and high-risk wagers.

• Polymarket's Model: The platform predominantly uses cryptocurrencies, which can offer users a degree of anonymity. Its offshore status enables it to host markets on military strikes, land invasions, and other sensitive geopolitical events that are forbidden on regulated U.S. platforms.

"If someone is doing something they know they shouldn't be doing, they're much more likely to be doing that on Polymarket than Kalshi," said Joseph Grundfest, a former Securities and Exchange (SEC) commissioner and current Stanford University law professor.

The View From Washington

The prediction market industry has found a more hospitable environment under the Trump administration, which has taken a starkly different approach than its predecessor.

• Trump's Welcome: Trump officials have dropped Biden-era legal challenges against the companies and have signaled a commitment to defending the industry's right to operate.
• Biden's Crackdown: The Biden administration took a much harder line, raiding the home of Polymarket's CEO and effectively shutting down its U.S. operations in 2022.
• Family Ties: The industry's political connections are notable. Donald Trump Jr. serves as an advisor to both Polymarket and Kalshi, and his venture capital fund, 1789 Capital, is an investor in Polymarket. Furthermore, the president's own media company, Truth Social, has announced plans to launch a prediction market service.

Critics argue these connections create a potential conflict of interest, suggesting the Trump family stands to benefit financially from a light-touch regulatory approach to the industry.

The Bottom Line: A New National Security Threat

The Israeli indictments serve as a global wake-up call. The ability to anonymously bet on sensitive geopolitical events using cryptocurrency creates a powerful incentive for espionage and the leaking of state secrets.

"The problem is we have a wide array of markets that are illegal, immoral and problematic that are facilitated by those trading with anonymous crypto," Grundfest warned. "Now prediction markets like Polymarket are the latest manifestation of this problem."

The ultimate danger, he noted, goes far beyond illicit financial gain.

• The Ultimate Risk: "Such bets can put your own military at greater risk because you are signaling to your enemies what may happen, and that puts your own troops in danger," Grundfest stated.

As Polymarket simultaneously plans a U.S.-based, CFTC-regulated launch, the industry stands at a crossroads. The events in Israel demonstrate that for governments worldwide, the stakes are no longer just financial—they are a matter of life and death and the integrity of national security.