The U.S. is targeting political bets: a new bill against insider trading on Kalshi and Polymarket
Another wave of regulatory pressure is brewing in Washington against prediction markets. This time, the lawmakers themselves are in the crosshairs. A Republican congressman from 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 participating in bets on political outcomes and government decisions on platforms like Kalshi and Polymarket.
The key motivation is to prevent the use of non-public information available to lawmakers for personal enrichment. The idea is not new: it builds on the provisions of the "Stop Insider Trading Act," which the committee approved back on January 14. As the sponsor stated, Americans should be confident that their representatives are writing laws, not betting on them. The essence is simple: congressmen have access to data that is unavailable to ordinary market participants, creating a glaring conflict of interest.
What exactly will the ban cover and who will it affect?
The bill covers bets on specific government decisions, actions of authorities, and outcomes of political events. Violators face a serious fine: either $2,000 or 10% of the bet amount, whichever is greater. Profits obtained from illegal transactions will have to be returned. Notably, it will be impossible to pay the fine using official expenses, Senate funds, or political donations. Those who resign without settling the debt may be referred to the Department of Justice for a civil lawsuit. It is important to emphasize that the ban does not apply to non-political events, such as sports betting.
A broad coalition against insider trading
This is only part of a large-scale offensive. Earlier, in March, senators introduced their own bill — the "Public Integrity in Financial Prediction Markets Act," aimed at combating insider trading on any platforms. In the House of Representatives, the "PREDICT Act" is moving forward in parallel with similar measures for the families of officials. Moreover, the Senate has already separately banned senators and their staff from betting on prediction markets. It appears that a bipartisan consensus on this issue is strengthening.
The market operators themselves are also preparing for stricter rules. Back in June, Kalshi launched a risk assessment system, employment verification, and whistleblower channels to weed out insiders. Polymarket, in turn, has brought in Chainalysis and is building an online monitoring system.
From my point of view, this bill is a logical and necessary step. Prediction markets have proven their value as an information aggregation tool, but their legitimacy directly depends on the honesty of participants. Allowing lawmakers, who have privileged access to data, to trade on political outcomes is a ticking time bomb for the reputation of the entire industry. If the US wants such platforms to become a full-fledged part of the financial system, the issues of insider trading must be resolved once and for all. And the current wave of bills is a clear signal to the market: play fair, or don't play at all.