The rise of political prediction markets and several well-timed trades have spurred lawmakers to introduce multiple bills aimed at stopping or regulating insider trading in prediction markets.
But lawmakers are far from agreeing on how far to extend such bans.
“Members of Congress should be prohibited from participating in prediction markets related to political events, policy decisions, and insider, nonpublic information,” said Michael Beckel, the director of money in politics reform at Issue One, a nonprofit government transparency group.
“These are commonsense guardrails that lawmakers on both sides of the aisle should embrace and would help increase trust in the institution of Congress.”
The flurry of bills introduced this Congress — more than 10 so far, according to Janice Luong, a policy associate at the Project on Government Oversight — runs the gamut.
A bill sponsored by Sen. Jeff Merkley, D-Ore., in the Senate and Rep. Jamie Raskin, D-Md., in the House, would prohibit betting through prediction markets on elections, government actions, sports and military actions. Their bill would bar such prediction markets throughout the country, rather than limiting the ban to members of Congress or government officials.
New York Democratic Rep. Ritchie Torres, meanwhile, introduced a bill in January after an anonymous Polymarket user with a new account made a $400,000 profit by betting that Venezuelan President Nicolás Maduro would be out of office.
His bill would prohibit federal elected officials, political appointees, executive branch employees and congressional staff from buying, selling or exchanging prediction market contracts related to government policy, action or political outcomes for those possessing material nonpublic information or who could reasonably obtain nonpublic information through their official duties.
Torres’ bill had 43 co-sponsors as of Tuesday afternoon, all Democrats. A companion version of the legislation was introduced in the Senate by Michigan Democratic Sen. Elissa Slotkin late last month.
Luong said while lawmakers disagree on the degree to which they should regulate prediction markets, it’s imperative that they do something.
“I think Congress doing nothing would be a mistake for and would be against the public’s interest,” she said.
Her organization and other good governance groups have thrown their support behind the Merkley-Raskin measure.
A second Merkley bill would prohibit members of Congress, the president, the vice president and senior executive branch officials from trading on event contracts. That measure would allow the attorney general to bring a civil action against violators who engage in prohibited conduct.
“To ensure that there is no trading activities in public office, the most straightforward way is a broad ban,” Luong said.
At least 50 new accounts on Polymarket placed substantial bets on a U.S.-Iran ceasefire in the hours, even minutes, before President Donald Trump announced the ceasefire late Tuesday on social media, The Associated Press reported last week. These were the only bets these accounts had made on Polymarket.
“The problem with insider trading is it’s flat-out cheating,” said Massachusetts Democratic Sen. Elizabeth Warren. “It’s particularly bad when it’s a member of the government that has the inside information and is not only trading on that information but may also be affecting outcomes directly. We need serious regulation on this.”
FiscalNote, the parent company of CQ and Roll Call, has announced a product expansion into political prediction markets.
Experts say a push to regulate prediction markets is an important step for restoring trust in government and elected officials.
“If you watch TV regularly, you are seeing commercial after commercial for predictive markets and other kinds of online gambling,” said Jordan Libowitz, vice president for communications at Citizens for Responsibility and Ethics in Washington. “I think this is something that is very much front and center, and there’s an issue that voters always tend to agree on, no matter what party they belong to, and that’s they don’t want their government officials to be abusing their power for their own financial gain.”
CREW supports both of Merkley’s bills, Libowitz said.
“No one in public office should financially profit from their position or insider knowledge. If lawmakers or policymakers act on insider information to game the system for their own financial advantage, that undermines trust in our government and our political system,” Beckel said.
In a March 29 letter to Commodity Futures Trading Commission Chair Michael Selig, Warren and Merkley asked Selig and the CFTC to “circulate executive branch-wide guidance explaining that federal employees must refrain from insider trading in prediction markets.”
The pair said they believe federal employees placing contracts on prediction markets is already illegal under a 2012 law that bars government officials from trading on insider information.
That law has faced criticism, with some saying it has yet to rein in stock trading among members of Congress, is rarely enforced and has spurred lawmakers to sidestep its reporting requirements.
Merkley and Warren argued that trading on the prediction markets falls under that 2012 law and that federal employees should heed its restrictions when it comes to insider trading on prediction markets.
“The CFTC maintains that event contracts are a type of swap subject to its jurisdiction and, therefore, it should ensure that federal employees understand existing restrictions on prediction market insider trading,” they wrote.
Libowitz said that while action on any of the efforts may not happen right away, he doesn’t see the issue going away any time soon.
“Congress is a deliberative body and things move slowly, and sometimes it takes a bill coming up in multiple congresses to go forward,” Libowitz said.
“This is an issue that a lot of people are talking about and when you have something that is in the public zeitgeist like this is, I think that makes it more likely that Congress will want to take action.”
