Congressional pressure on prediction markets continues to grow as Rep. James Comer (R-KY) has announced a new investigation into insider trading.
Comer, the chairman of the House Committee on Oversight and Government Reform, sent letters to executives at Kalshi and Polymarket to request documents and information on the prediction markets’ efforts to protect against insider trading.
“The Committee on Oversight and Government Reform is examining the use of online prediction market platforms by some users to conduct insider trading,” Comer said in a release. “Specifically, we are examining the adequacy of company safeguards to prevent access to offshore sites to circumvent compliance with applicable U.S. federal regulations governing prediction market platforms.”
Last week, the Senate Commerce, Science and Transportation Committee held a hearing that looked at sports betting integrity in the U.S. Much of the discussion centered on prediction markets.
Prediction market requests
Comer is looking to assess how the platforms verify the identities of domestic and foreign account holders. He also seeks to understand how the enforce geographic restrictions and monitor suspicious activity.
The letters were sent to Polymarket CEO Shayne Caplan and Kalshi CEO Tarek Mansour.
“Internal records held by prediction market platforms are the only means by which bad actors can be identified and to determine whether platforms are meeting their legal obligations,” Comer wrote.
“This growing pattern of insider trading activity on prediction market platforms indicates that Congressional action may be necessary.”
Insider trading stats
Comer cited a New York Times article that found more than 80 Polymarket users had placed suspiciously timed trades.
Those trades include undisclosed U.S. and Israeli military operations against Iran.
The press release also cited several instances of several politicians trading on their own campaigns.
It also notes the federal indictment of U.S. Army Master Sergeant Gannon Ken Van Dyke, who used classified information about the capture of Venezuelan President Nicolás Maduro to profit $409,000 on trades.
Congressional prediction markets interest
Last week’s hearing featured an array of panelists, including Patrick McHenry, a former U.S. Representative who now serves as a senior advisor for the Coalition of Prediction Markets. Much of the integrity discussion revolved around the regulation of prediction markets.
“This does allow us to start to build where we should move in regulation and also looking at the division between what should be federal and what should be state and preserving those states’ rights in order to move forward with this,” Sen. Marsha Blackburn, who chaired the hearing, said.
Despite a two-hour discussion, little new information came from the hearing.
There are multiple bills introduced in Congress to limit prediction markets, including one that would ban offering sports event contracts. Another bill would bar action on military actions and terrorism.
