Prediction markets are the new open-source spycraft

Opinion by: Joshua Chu, co-chair of the Hong Kong Web3 Association

Foreign intelligence can forget honeytraps in 2026. In today’s day and age, the juiciest clues about US power moves are no longer whispered into hotel pillows.

Instead, they’re splashed across prediction markets.

When someone loads a seven-figure short before the US president tweets about tariffs, the operation itself has left no footprint. The trader who spills the secret onchain, however, is the link to how classified information gets leaked.

The first year of Trump’s second term has delivered a series of jaw-dropping examples. There have been Signal chat leaks. We’ve seen a handful of wallets on prediction market platforms pulling off pitch-perfect trades around heavily classified US actions. What may be an embargoed decision can turn into a profit-making opportunity. The only problem is that what happens onchain stays on the public ledger forever.

For foreign intelligence services, this starts to look like a dream-come-true scenario — a real-time open-source signal feed powered by greed rather than lust or ideology.

Leaks, trades and enforcement U-turns

In or around October 2025, crypto markets were jolted when a single person unloaded enormous Bitcoin (BTC) and Ether (ETH) shorts less than one hour before President Trump’s surprise tariff announcement. They walked away with near nine-figure gains as historical prices plunged.

Many debate whether this was technical insider trading, but the timing was so uncanny that traders quickly dubbed the suspect account a “Trump insider whale.”

In early 2026, an anonymous Polymarket account (created only days before the US operation to capture Venezuelan president Nicolás Maduro) piled tens of thousands of dollars into the “Maduro captured or removed by 30 January” contracts.

Hours after the covert raid, those same positions were paid out in hundreds of thousands of dollars in crypto, instantly turning a niche prediction market into a case study of how war plans might leak through onchain bets.

To be clear, there is no public evidence that prediction market platforms themselves have visibility into, or control over, whether traders are acting on public information or on improperly obtained insider knowledge. These markets function as neutral venues: They record beliefs and capital flows, not the provenance or legality of the information behind individual trades.

Second, controversy revolves around relaxing enforcement and conflicts of interest.

In April 2025, the US Department of Justice (DOJ) disbanded its National Cryptocurrency Enforcement teams and instructed prosecutors to scale back many digital asset cases, with Deputy Attorney General Todd Blanche declaring that the DOJ was “not a digital assets regulator.” For the crypto industry, which had been bracing for ever tougher US regulatory actions for years, this announcement was a whiplash reversal.

What was not disclosed at the time of the announcement but only made public as a result of subsequent disclosure was that Blanche allegedly personally held a substantial portfolio of Bitcoin, Ether and other crypto linked assets at the time when he issued the instruction to disband the National Cryptocurrency Enforcement Unit despite the fact that he signed an ethics agreement to divest and recuse from matters affecting his various holdings.

As a result, six senators have now alleged a “glaring” conflict of interest and asked whether he effectively rewrote the DOJ’s crypto policy while simultaneously sitting on a sizable crypto bag.

Stitched together, a prediction market windfall could occur around a covert raid and a crypto-exposed deputy AG dialing down crypto enforcement. In the US, it is no longer just an ethics problem but an intelligence leak and national security problem.

Prediction markets and perps as open-source signals

This is not an indictment of any single platform but a structural consequence of placing high-stakes geopolitical questions into radically transparent, permissionless markets.

When incentives, access and opacity collide, the signal emerges regardless of the venue hosting the trade. To see why it is an intelligence and national security problem, one must think more like an analyst than a regulator.

Prediction market platforms allow users to bet on the probability of real-world events, like elections, court rulings, wars and even the fate of particular world leaders. Every bet is a timestamped statement of belief and because crypto is involved, permanently recorded on the blockchain.

High-liquidity derivatives venues like Hyperliquid offer a parallel channel for price movements, allowing traders to express strong views and convictions or inside information about pending crashes or surges, by way of long and short positions.

From a foreign intelligence perspective, these are belief markets with perfect memory, ripe for data mining. If a fresh wallet appears, with trades only predicated on sensitive geopolitical events with repeatedly tied pitch-perfect timing, the wallet is no longer just a trader — it is a signal.

In traditional markets, much of this behavior is obscured by dark pools, over-the-counter flows and delayed reporting. On blockchain-enabled markets, however, by design, everything is radically transparent. Anyone with a block explorer can see the size, timing and counterparties of the trade and feed them into forensic models.

This is why the "Maduro trade" mattered so much. It demonstrated that someone was prepared to jump in and monetize their access to sensitive US operational plans, all while doing so on an open-chain venue, with their moves permanently recorded on the blockchain. It is only reasonable for foreign intelligence to treat such venues not just as curiosities, but also as intelligence — or counterintelligence — sensors.

From honeytraps to prediction markets

While classic espionage still relies on human sources, which may take years to train and create, 2026 has shown something new: a combination of crypto-literate insiders, weak ethical boundaries and sensitive plans combined and used to front-run onchain trades and prediction markets.

Any foreign intelligence service could crawl publicly visible data on prediction markets to analyze large, unusual geopolitical bets, mapping winning wallets against other observable market activity and deploying AI to detect sudden shifts in odds or perp positioning as early-warning signals.

In that world, a single well-placed “crypto-degen” with access to embargoed plans can prove as valuable (if not more) than any honeytrap because every profitable bet is silently broadcasting a signal to anyone watching on the chain.

Legal and regulatory blindspot

With the DOJ having just wound down its specialist crypto unit, the move is only adding to the gap in law enforcement and regulatory blind spots. Insider trading rules are, after all, primarily built for stocks and bonds.

Given Blanche’s announcement that the Securities and Exchange Commission is “not a digital assets regulator,” the authorities are unlikely to act on a USDC (USDC) bet on a coup or leveraged trade based on a draft tariff tweet. This leaves a vacuum precisely where the most sensitive information now leaks, turning crypto markets into low-risk, high-yield hunting grounds for foreign intelligence services looking to detect and exploit US op-sec failures.

If the pattern holds, the first “agent” to outperform traditional spies may sit behind an API, ingesting publicly visible Polymarket odds and Hyperliquid order flow, training models to spot unnatural moves around moments that Washington would most want to keep hidden.

The star asset of the next era of espionage may be a crypto bro who just can’t resist monetizing secrets when a classified operation is about to go down.

Opinion by: Joshua Chu, co-chair of the Hong Kong Web3 Association.