Key Highlights
- A bipartisan bill targets banning officials from trading prediction markets using insider information.
- The proposal introduces penalties and mandatory disclosures for covered transactions.
- It expands ethics rules to address risks in emerging event-based markets.
A bipartisan group of U.S. senators has introduced legislation aimed at tightening oversight of prediction markets, focusing on the use of non-public information by government officials.
The proposal, backed by Todd Young, Elissa Slotkin, John Curtis, and Adam Schiff, would prohibit elected officials and federal employees from trading on event contracts using information obtained through their official roles. The move reflects growing concern that prediction markets could be exposed to the same insider risks long associated with traditional financial markets.
Extending ethics rules to new market structures
The bill seeks to apply established insider trading principles to prediction markets, which allow users to bet on real-world outcomes ranging from elections to geopolitical events.
Under the proposal, any non-public information that could influence a trading decision would be off-limits. The restriction applies broadly across platforms, including those operating outside the United States. Lawmakers argue that existing ethics frameworks do not adequately cover this emerging category of financial activity.
The legislation casts a wide net. It applies to senior government figures—including the president and members of Congress, as well as staff, political appointees, and employees across executive and independent agencies. By extending the rules across multiple levels of government, the bill aims to address risks tied to access to sensitive or early information.
Penalties and reporting requirements
Violations would carry financial penalties, including fines tied to profits earned from prohibited trades. In addition, officials would be required to disclose trades above a set threshold within a defined timeframe.
These disclosures would include details such as contract type, trade size, timing, and platform used, introducing a reporting structure similar to existing financial disclosure rules. Oversight and enforcement would involve ethics committees working alongside the Commodity Futures Trading Commission, which regulates derivatives and event-based contracts.
Separate push to restrict sports and casino contracts
The latest development comes as a bipartisan pair of U.S. senators plans to introduce legislation that would bar federally regulated prediction market platforms from offering contracts tied to sports and casino-style games.
If enacted, the measure would directly impact platforms like Kalshi and Polymarket, where a significant portion of trading activity is linked to sports outcomes.
Betting on sensitive events draws further attention
Meanwhile, on March 18, Senator Chris Murphy (D-Conn.) and Representative Greg Casar (D-Texas) introduced bicameral legislation that focuses on banning wagers tied to high-risk or sensitive events such as wars, terrorism, and government actions.
The bill would prohibit any trading on outcomes that could be influenced by insiders or involve national security concerns, reflecting growing unease over how such markets operate.
Broader regulatory shift
The bill comes amid increasing attention on prediction markets as they grow in size and visibility. Recent trading activity tied to geopolitical events has raised questions about whether individuals with privileged information could gain an advantage.
Rather than targeting the platforms themselves, this proposal focuses on participant behavior, specifically, the responsibilities of those in public office.
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