Israeli prosecutors indict IDF reservist and civilian for Polymarket insider trading on Iran attacks

Israeli authorities have formally charged an army reservist and a civilian accused of using classified military information to place bets on Polymarket.

According to court documents and official statements released Thursday, the Tel Aviv District Court lifted a gag order at the request of the State Attorney’s Office cyber department, allowing limited disclosure of the investigation. 

State officials claim the accused reservist had accessed classified information during his military service, which he passed to a civilian to place wagers online.

Israeli law enforcement confirmed the suspects were arrested during a joint operation with domestic security agency Shin Bet, the Arazim investigations unit within the Defense Ministry’s Security Authority, and Israel Police.

Ex-military shared classified data that a civilian used on Polymarket 

Local news outlet The Jerusalem Post reported that prosecutors filed indictments against both suspects on several charges, including severe security offenses, bribery, and obstruction of justice. The investigators allege the pair used confidential operational information to gain a betting advantage in military-related markets.

“The defense establishment emphasizes that placing such bets, based on secret and classified information, poses a real security risk to IDF operations and to the security of the state,” a joint statement from authorities read. The officials noted they would “thwart and bring to justice anyone involved in the unlawful use of classified information.”

The Israeli military separately condemned the alleged conduct, stating the reservist’s actions represented “a serious ethical failure and a clear crossing of a red line, which are inconsistent with the IDF’s values and the standards expected of its service members.”

Last month, Israel’s public broadcaster Kan reported that Shin Bet had begun investigating suspicions that someone within the defense establishment was leaking classified documents for betting purposes.

According to information from the said investigation, an online user with the moniker ricosuave666 made bets which correctly foretold Israeli military activities against Iran. According to the prosecution, these wagers amounted to tens of thousands of dollars, with an estimated profit of $150,000.

However, the reservist’s Attorney, Nir Cohen Rochverger, has disputed some elements of the charges. Rochverger said authorities had to drop an earlier allegation claiming his client harmed Israel’s national security.

“Our client is a highly regarded individual who has made a significant contribution to Israel’s security. Due to the broad gag order, we cannot at this stage address the matter in detail, only clarify what it does not contain,” he said in a statement.

He also mentioned that the defense intends to challenge the case on several grounds, including the agencies’ involvement in investigative misconduct. 

“We have strong arguments regarding the indictment that was filed, the defects in it, selective enforcement, and the improper and severe conduct of the investigative bodies, which itself caused harm to security. We are convinced that once these are presented, the case will conclude in a manner entirely different from how it began.”

Insider trading allegations put spotlight on prediction markets

The Israeli case joins a list of instances in which authorities believe classified information was used in decentralized prediction markets. Regulators and lawmakers in several jurisdictions, like the US, are probing whether existing financial or gambling laws adequately cover prediction markets.

In January, US Representative Ritchie Torres proposed legislation to stop insider trading on such platforms after a trader reportedly earned about $400,000 by wagering on the capture of Venezuelan President Nicolás Maduro, hours before the news became public.

Advocates of prediction markets argue that such activities should not be classified as simply “gambling.” The thought is the collective betting information provides better insight into what will happen in the future compared to traditional polls.

“It’s the most accurate thing we have as mankind right now, until someone else creates some sort of super crystal ball,” Polymarket chief executive Shayne Coplan told CBS’s 60 Minutes last November.

Blockchain analyst Andrew 10 Gwei, who has investigated insider trading within crypto startups, said prediction markets share information with the public faster than conventional news channels. “You gain access to critical information about key world events faster than everyone else,” he said.

Kalshi recently recorded one of its busiest trading days during the Super Bowl, with users placing a $113 million pool predicting which song the Puerto Rican singer Bad Bunny would perform at halftime.

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