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Two U.S. senators have introduced legislation that would prohibit senior government officials from trading contracts on prediction market platforms such as Kalshi and Polymarket. Lawmakers say the proposal addresses concerns that confidential government information could be used for personal profit through event based trading markets.
Good to Know
The legislation, called the End Prediction Market Corruption Act, was introduced by Sen. Jeff Merkley of Oregon and Sen. Amy Klobuchar of Minnesota. The proposal would restrict trading activity for the President, Vice President, members of Congress, and other senior officials.
Lawmakers argue that government insiders could possess information capable of influencing prediction market outcomes. Event contracts traded on platforms such as Kalshi or Polymarket allow participants to wager on outcomes ranging from elections to geopolitical events.
Jeff Merkley said:
“When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits.
“Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.”
Recent activity in prediction markets helped push the proposal forward. Platforms experienced large trading volumes around contracts related to conflict with Iran and speculation surrounding removal of Supreme Leader Ali Khamenei shortly before hostilities began.
Under the proposed law, the Attorney General could pursue civil enforcement against senior executive branch officials who violate the restriction. Penalties would include a $10,000 fine along with repayment of any profits earned through prediction market trading.
Supporters say the proposal would strengthen oversight by the Commodity Futures Trading Commission, the federal regulator responsible for supervising prediction markets in the United States.
Amy Klobuchar said:
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct.
“This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain.”
The bill has additional backing from Sen. Chris Van Hollen of Maryland and Sen. Adam Schiff of California. Republican lawmakers have not endorsed the proposal so far, creating uncertainty around passage in a Congress currently controlled by Republicans.
Separately, lawmakers recently asked Commodity Futures Trading Commission chair Michael Selig to restrict prediction market offerings tied to death, injury, and war related events.
Kalshi, one of the platforms affected by the proposal, provided input during the legislative process. Merkley consulted the company before introducing the bill. Kalshi said in a statement:
“In the past few months, we’ve had outreach from policymakers about work they’re doing to ensure market integrity, and we’re in talks with many of them, including Senator Merkley.”
Legal disputes involving prediction markets also continue across several U.S. states. Platforms such as Kalshi and Polymarket currently face court battles over sports event contracts that regulators claim function as unlicensed sports betting.