The US targets lawmakers' bets: a new bill against insider trading on Polymarket and Kalshi
The regulatory battle surrounding prediction markets in the United States is entering a new phase. A Republican congressman from Wisconsin, who chairs the House Committee on Administration, has introduced the Stop Lawmakers from Predicting Act. The bill explicitly prohibits members of Congress, their spouses, and minor children from betting on political events and government decisions using platforms like Kalshi and Polymarket.
The primary motive is concern that lawmakers, with access to non-public information, could gain an unfair advantage over ordinary market participants. As the bill's sponsor stated: "Americans should be confident that their congressman is not profiting from insider information. Lawmakers should be writing laws, not betting on their outcomes."
What exactly is prohibited and what are the penalties?
The new bill builds on a previous initiative—the Stop Insider Trading Act, approved by the committee on January 14. The ban covers transactions on specific government decisions, official actions, 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.
An important nuance: paying the fine from official expenses, Senate funds, or political donations is prohibited. Those who resign without settling their debt may be referred to the U.S. Department of Justice for civil action. The law does not affect bets on non-political events, such as sports.
Coordinated efforts and platform responses
Steil's bill is not an isolated initiative. In March, senators introduced their own proposal—the Public Integrity in Financial Prediction Markets Act, aimed at combating insider trading on any platform. The House also has a parallel document—the PREDICT Act. Previously, the Senate separately banned senators and their staff from betting on prediction markets.
Market operators themselves, recognizing the risks, have begun to act proactively. As early as 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 online monitoring system.
Cryptalist Analysis: This wave of legislative initiatives is a clear signal that prediction markets are moving from the "gray zone" into the focus of regulatory scrutiny. For the long-term legitimacy of platforms like Kalshi and Polymarket, the issue of combating insider trading is critical. If they fail to prove their ability to self-regulate, they will face strict government regulation, which could significantly limit the range of events available for trading.