U.S. lawmakers and regulators are sharpening their focus on prediction markets as a high-profile insider-trading narrative unfolds around Polymarket and Axiom. At the center is a claim by on-chain investigator ZachXBT that an Axiom employee—Broox Bauer—and others allegedly used internal tools to access sensitive user data and execute profitable insider trades, a practice the researcher says may have persisted since early 2025. The timing is notable: Polymarket traders had placed large bets on the outcome of ZachXBT’s disclosures, with activity approaching tens of millions of dollars. In response, Axiom said it has removed access to the implicated tools and pledged to investigate and hold responsible parties to account, framing the episode as a test of governance and user protection within the evolving prediction-market ecosystem.
Key takeaways
- On-chain sleuth ZachXBT alleged that an Axiom employee, Broox Bauer, and others conducted insider trading by leveraging internal tools to access private user data, with the investigation dating back to early 2025.
- Axiom stated it has cut off access to the questioned tools and committed to an internal probe, stressing that the incident does not reflect the broader team or its user-first ethos.
- Polymarket bettors wagered nearly $40 million on the investigation’s outcome, with at least one user profiting about $400,000 and others winning more than $9.7 million on the contract asking which crypto company ZachXBT would expose.
- The episode arrives as U.S. regulators debate the proper reach of federal oversight over prediction markets, with CFTC Chair Michael Selig asserting exclusive jurisdiction and signaling potential clashes with state authorities.
- The case adds to a broader tightening of governance norms and data-access controls across crypto prediction platforms, underscoring regulatory risk and the need for transparent, auditable processes.
Market context: The unfolding events occur against a backdrop of ongoing regulatory scrutiny of prediction markets, where federal and state authorities have historically juggled distinct jurisdictions. The CFTC has stressed federal authority, while some states have pursued their own enforcement actions, creating a patchwork that operators must navigate as markets rely on on-chain data and user-submitted contracts.
Why it matters
The allegations touch on core governance questions for crypto-enabled prediction platforms. If internal tools can be leveraged to access user data for trading advantage, it raises serious concerns about user privacy, algorithmic transparency, and the integrity of market signals. Platforms that rely on public-facing interfaces for forecasting outcomes must demonstrate robust controls, independent audits, and clear incident-response playbooks to preserve trust among participants who treat these markets as both entertainment and hedged exposure to real-world events.
From a market-structure perspective, the episode illustrates how prediction markets intersect with fast-moving on-chain analytics. The ZachXBT disclosures, if verified, would imply a potential mismatch between platform-level governance and user expectations, potentially inviting regulatory actions if risk controls are perceived as lax or opaque. For investors and builders, the case underscores the importance of transparent data-access policies, strict separation between product tooling and private data, and incident disclosures that are timely and verifiable.
On the regulatory front, the scenario underscores the tension between federal authority and state initiatives in enforcement. The CFTC chair’s comments about exclusive jurisdiction suggest a preference for centralized oversight, which could influence how prediction-market platforms structure offerings, disclosures, and compliance programs going forward. Traders and operators should monitor not only the outcomes of internal investigations but also any subsequent regulatory guidance that clarifies permissible use of internal tools, data access, and administrative controls within prediction markets.
Ultimately, the incident matters because it tests the resilience of prediction markets as legitimate, auditable venues for price discovery on real-world events. If platforms fail to demonstrate robust safeguards, participants may migrate to environments with stronger governance or shifted risk profiles. Conversely, transparent corrective steps that restore trust—such as rapid suspension of the implicated tools, independent audits, and clear accountability measures—could reinforce the long-term appeal of crypto-enabled prediction markets as competitive and innovative financial infrastructure.
What to watch next
- Updates from Axiom’s internal investigation, including findings and any leadership actions taken against implicated personnel.
- Any formal statements or enforcement actions from U.S. regulators, particularly the CFTC, regarding prediction-market governance and data-access policies.
- Responses from Polymarket and other platforms about governance changes, risk controls, and disclosures in light of these revelations.
- Further disclosures from ZachXBT or other researchers that could corroborate or challenge the claims of insider trading and tool misuse.
- New disclosures or developments around the contract categories that speculated on the case, including volumes and settlement outcomes.
Sources & verification
- ZachXBT’s X post alleging insider trading by an Axiom employee and others (link: https://x.com/zachxbt/status/2027016064534757659).
- Axiom’s X post acknowledging the incident, stating access to tools has been removed and that the team will investigate (link: https://x.com/AxiomExchange/status/2027018976929423583).
- Polymarket bettors’ activity surrounding the ZachXBT insider-trading exposure, including bets near $40 million (link: https://cointelegraph.com/news/polymarket-bets-zachxbt-insider-trading).
- CFTC Chair Michael Selig’s remarks on exclusive jurisdiction over prediction markets (link: https://cointelegraph.com/news/cftc-michael-selig-defending-prediction-markets).
- Related coverage on Kalshi’s governance and insider-trading-related actions (link: https://cointelegraph.com/news/kalshi-booted-politician-youtuber-insider-trading).
Market reaction and key details
The contemporary disclosure cycle around insider-trading claims in crypto prediction markets marks a pivotal moment for the sector. As the industry grapples with how to regulate and supervise on-chain prediction activities, observers are watching closely how platforms respond to allegations of improper data access and trading influence. The rapid public responses from Axiom reflect a recognition that reputational risk in this space can translate into regulatory risk quickly, especially when user trust is at stake and the outcomes of investigations are uncertain.
Why it matters for users, builders, and the market
For users, the episode reinforces the importance of data governance, transparent tool access, and clear incident reporting. Any perception that insiders could exploit tools to gain an edge undermines confidence in the integrity of the market and may deter participation, especially from risk-averse traders who rely on credible price signals. For builders and operators, the episode highlights the value—and the cost—of implementing verifiable controls, independent audits, and robust user-privacy protections as a competitive differentiator in a crowded field of prediction platforms.
From a market-wide lens, the incident sits at the intersection of regulatory clarity and technological experimentation. The CFTC’s insistence on federal jurisdiction signals that there could be a stricter, more standardized framework for how prediction markets operate in the United States, potentially influencing product design, KYC/AML considerations, and inter-exchange cooperation. Participants should expect a period of heightened scrutiny across platforms as governance models evolve and as regulators balance innovation with the protection of market integrity and consumer data.
What to watch next
- Formal disclosures from Axiom detailing the investigation’s scope and any disciplinary actions.
- Regulatory updates or new guidance from the CFTC and state authorities on prediction-market governance and data access.
- Material changes to Polymarket’s or other platforms’ risk controls and user-privacy policies.
- Additional research or forensic findings from ZachXBT or other researchers that corroborate or challenge the claims.
Sources & verification
- ZachXBT’s X post alleging insider trading by a named Axiom employee and others (link: https://x.com/zachxbt/status/2027016064534757659).
- Axiom Exchange’s official comment and tool-access suspension (link: https://x.com/AxiomExchange/status/2027018976929423583).
- Polymarket bet coverage on ZachXBT insider-trading exposure (link: https://cointelegraph.com/news/polymarket-bets-zachxbt-insider-trading).
- CFTC leadership remarks on exclusive jurisdiction over prediction markets (link: https://cointelegraph.com/news/cftc-michael-selig-defending-prediction-markets).
- Related coverage on Kalshi’s enforcement actions and governance (link: https://cointelegraph.com/news/kalshi-booted-politician-youtuber-insider-trading).
What the investigation changes for the landscape of prediction markets
The case underscores the delicate balance prediction-market platforms must strike between enabling rapid, data-driven bets and enforcing robust controls that prevent misuse of internal tools. It also highlights the evolving role of on-chain researchers in surfacing governance and ethics concerns, and the extent to which platforms must respond quickly and transparently to preserve market integrity and participant confidence. As regulators intensify their focus, the sector will likely see accelerated moves toward standardized governance practices, clearer lines of responsibility, and more explicit privacy safeguards—elements that could determine whether prediction markets remain a vibrant, trust-worthy corner of the crypto ecosystem.