U.S. authorities are preparing a ban for members of Congress on betting in Polymarket and Kalshi.
Prediction markets in the U.S. have come under the scrutiny of lawmakers. Republican Bryan Steil, who chairs the House Committee on Administration, has introduced the Stop Lawmakers from Predicting Act, which directly prohibits members of Congress, their spouses, and minor children from betting on political events and government decisions.
The key motivation behind the initiative is to prevent profiting from insider information. Steil rightly notes that lawmakers should be writing laws, not betting on them. With access to data unavailable to the general public, congressmen could gain an unfair advantage in prediction markets, undermining trust in government institutions.
The bill is a logical extension of the Stop Insider Trading Act, which the committee approved on January 14. The new initiative aims to restore citizens' faith in the integrity of public officials. 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. Any profits must be returned. Notably, the fine cannot be paid using official funds, Senate budgets, or political donations. Violators who have resigned may be referred to the Department of Justice for civil lawsuits. Sports events and other non-political markets are not affected by the law.
Legislative race and platform response
This is not the only attempt to curb prediction markets. In March, Senators Todd Young, Elissa Slotkin, John Curtis, and Adam Schiff introduced their own bill — the Public Integrity in Financial Prediction Markets Act — aimed at combating insider trading on any platform. The House of Representatives is also developing the PREDICT Act with similar measures for officials' families. Earlier, the Senate separately banned senators and their staff from betting on prediction markets.
The platforms themselves are not standing idly by. As early as June, Kalshi launched a risk assessment and employment verification system to prevent insiders. Polymarket, in turn, has brought in Chainalysis and is building an online monitoring system. These are sensible steps, but they are unlikely to stop the legislative machine.
Cryptalist Analysis: Bipartisan consensus on this issue is clear — both Republicans and Democrats are seeking to close the loophole for insider trading. Prediction markets will have to adapt to new realities, and platforms that have already implemented KYC and monitoring systems will be in a more advantageous position. However, the main risk for the industry is not so much the ban on congressmen itself, but the precedent it sets for further regulation of the entire prediction market ecosystem.