It's not being regulated as a casino (which would limit what the casino could do). It is being regulated, to a limited extent, like a commodity market (which does limit what the participants can do).

If 0.01% of people engaging in insider trading are caught and prosecuted, it is effectively unregulated.

I believe Polymarket wants it to fall under the regulations of cftc as it is implemented like an option/event contract. And cftc says that they don't care about which technology is used. But as far as I now this is the first case it will be tested for real and the views of cftc and a judge may not be the same. I fail to see how it can be classified as insider trading. But, it is till fraud so I'm not sure how much it matters in the end.