Prediction markets drew fresh scrutiny in Washington on after two U.S. senators proposed banning federal lawmakers and other top government officials from trading event contracts.
Sens. Jeff Merkley, D-Ore., and Amy Klobuchar, D-Minn introduced the End Prediction Market Corruption Act on Thursday. The bill would bar the president, vice president, members of Congress and certain senior executive branch officials from buying or selling contracts tied to the outcome of real world events.
The proposal comes as prediction markets draw growing attention in Washington following reports that traders profited from bets tied to sensitive geopolitical developments, including recent U.S. military action involving Iran.
“When public officials use nonpublic 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,” Merkley said in a statement announcing the bill.
The legislation would establish financial penalties starting at $10,000 for violations and expand the Commodity Futures Trading Commission’s authority to police potential insider trading in event contract markets.
Insider trading concerns fuel proposal
Prediction markets have expanded rapidly under the Trump administration as Kalshi and Polymarket offer contracts tied to elections, economic policy, geopolitical events and sports. The markets have drawn growing scrutiny from lawmakers as some traders appeared to profit from contracts tied to sensitive government actions, including recent U.S. military operations and political developments abroad.
Those cases raised concerns that individuals with access to nonpublic government information could potentially profit by trading contracts tied to policy decisions or military actions, Merkley said.
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct,” Klobuchar said in a statement. “This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors.”
Sens. Chris Van Hollen, D-Md., Adam Schiff, D-Calif., and Kirsten Gillibrand, D-N.Y. cosponsored the bill. It has no Republican co-sponsors, which could complicate its path in the GOP-controlled Congress.
CFTC Chair Michael Selig has publicly defended the agency’s jurisdiction over federally regulated event contracts while lawmakers and state regulators debate how prediction markets should be governed. He has promised to issue more formal regulatory framework for the sector.
States targeting prediction markets also
The federal proposal comes as prediction markets face increasing pressure from state lawmakers and gaming regulators.
In New Jersey, lawmakers recently introduced legislation that would restrict certain event-based contracts and require platforms offering them to comply with the state’s sports betting framework. Vermont lawmakers have also proposed a bill to ban prediction markets outright.
Meanwhile, state gaming regulators argue that some event contracts resemble sports wagers but operate outside state gambling laws because they are structured as federally regulated derivatives.
That conflict between federal derivatives oversight and state gambling regulation has become one of the central issues surrounding prediction markets as platforms expand into sports and face a growing patchwork of legal challenges from state regulators.
