U.S. lawmakers are preparing a ban on betting in Kalshi and Polymarket: a new blow to prediction markets
A campaign to limit politicians' participation in prediction markets is gaining momentum in the U.S. Congress. Republican Brian Steil of Wisconsin, Chairman of the House Committee on Administration, has introduced the "Stop Lawmakers from Predicting Act." The bill directly prohibits members of Congress, their spouses, and minor children from betting on political events and government decisions using prediction platforms such as Kalshi and Polymarket.
Why is this important?
The primary motivation for the initiative is combating insider trading. Steil and his supporters fear that lawmakers, with access to non-public information, could gain an unfair advantage in these markets. "Americans should be confident that their congressman is not profiting from insider information," Steil stated. "Lawmakers should be writing laws, not betting on their outcomes." This poses a direct threat to the reputation of both public officials and the platforms themselves.
Ban Mechanism and Penalties
The bill is an expansion of the earlier "Stop Insider Trading Act," which has already been approved by the committee. The ban covers bets on specific government decisions, actions by authorities, and outcomes of political events. Violators face a fine of $2,000 or 10% of the bet amount—whichever is greater. Illegally obtained profits must be returned. Notably, fines cannot be paid using official funds or political donations. Unpaid debts may be referred to the Department of Justice for civil action, even if the lawmaker resigns. Bets on non-political events, such as sports, are not affected by the law.
Context and Market Reaction
Steil's initiative is part of a broader crackdown. In March, Senators Todd Young, Elissa Slotkin, John Curtis, and Adam Schiff introduced their own "Public Integrity in Financial Prediction Markets Act," aimed at combating trading on non-public information across all platforms. The House of Representatives is also advancing the PREDICT Act with similar measures. Earlier, the Senate separately banned senators and their staff from betting on prediction markets.
Platform operators themselves have already begun preparing for stricter rules. In June, Kalshi launched a risk assessment system, employment verification, and whistleblower channels to prevent insiders from accessing the platform. Polymarket, in turn, has partnered with Chainalysis and is building an on-chain monitoring system. This indicates that the industry recognizes the threat and is trying to maintain legitimacy in the eyes of regulators.
Cryptalist Analysis: This initiative is a logical yet extremely important step for legitimizing prediction markets in the U.S. If the law is passed, it will not only increase trust in public officials but also set a precedent for stricter regulation of the entire industry. For long-term investors in tokens of prediction platforms, this signals that the "Wild West" era is coming to an end, giving way to a more structured and possibly less volatile, but more sustainable ecosystem.