Prediction markets like Kalshi and Polymarket are well aware that they have an insider-trading problem. It’s inherent to their business model: When you make a website where anyone can bet on anything, there is going to be someone with some nonpublic information ready to place a wager and make a killing. Sometimes, those insider-trading scandals are relatively harmless, like the one-day-old Polymarket account that correctly predicted 17 out of 20 Super Bowl halftime show events, including appearances from Lady Gaga and Ricky Martin.

But an indictment in Israel on Thursday shows the darker side of this pattern. A joint statement from the Defense Ministry, Israeli police, and the Shin Bet domestic security announced bribery and........

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