Prediction markets have sparked a golden age of insider trading—but the party may be coming to an end

The problem of traders turning a buck on inside information is as old as markets themselves. But in the last year, the scope of insider trading has grown to unprecedented levels thanks to new platforms like Kalshi and Polymarket that offer bets on everything from major world events to celebrity trifles. 

In recent months, the rise of these prediction markets has given rise to a series of high-profile controversies. One saw a Polymarket user wager $32,000 that President Nicolas Maduro...