The U.S. Congress is preparing a ban on betting on Kalshi and Polymarket: a new blow to prediction markets
A campaign to restrict lawmakers' participation in prediction markets is gaining momentum in Washington. Wisconsin Republican Bryan Steil, who chairs the House Committee on Administration, has introduced the Stop Lawmakers from Predicting Act. The bill aims to prohibit members of Congress, their spouses, and minor children from making financial bets on political events and government decisions using platforms such as Kalshi and Polymarket.
The key motive behind the initiative is concern that lawmakers, with access to confidential information, could use it to gain an unfair advantage in these markets. Essentially, it is about combating potential insider trading in a new, digital guise. "Americans should be confident that their congressman is not profiting from insider information. Lawmakers should be writing laws, not betting on their outcomes," Steil stated, emphasizing the need to restore trust in public officials.
What exactly is prohibited and what sanctions are provided
Steil's bill is a logical continuation of the earlier Stop Insider Trading Act, which the committee approved on January 14. The new document specifies the ban: it concerns bets on specific government decisions, actions of authorities, and outcomes of political events. Violations are subject to a fine of $2,000 or 10% of the bet amount—whichever is greater. Any profit obtained from such a bet is subject to forfeiture.
An important nuance: it will be impossible to pay the fine using official expenses, Senate funds, or political donations. Moreover, if the violator resigns or ends their career without paying the fine, their case may be referred to the U.S. Department of Justice for a civil lawsuit. The law does not affect bets on non-political events, such as sports, making it a targeted strike specifically at the segment of political predictions.
Congress and platforms prepare for new rules
Steil's bill is just part of a broader trend. In March, Senators Todd Young, Elissa Slotkin, John Curtis, and Adam Schiff introduced their own proposal—the Public Integrity in Financial Prediction Markets Act—aimed at combating trading on confidential information on any platform. The House of Representatives also has a similar initiative, the PREDICT Act, with comparable measures for the families of officials. Earlier, the Senate separately banned senators and their staff from betting on prediction markets.
The market operators themselves, aware of the pressure, are taking preventive steps. As early as June, Kalshi launched a risk assessment system, employment verification, and whistleblower channels to prevent insiders from entering the platform. Polymarket, in turn, has brought in Chainalysis and is building an on-chain monitoring system.
My analysis: This wave of bills is a clear signal that prediction markets have ceased to be a "gray area" and have attracted the attention of regulators at the highest level. While protection against insider trading looks noble, we see a risk of excessive regulation that could stifle innovation in this sector. The key question is whether lawmakers can find a balance between fair play and preserving the decentralized nature of these markets. The adoption of at least one of these bills will set a precedent that changes the rules of the game for the entire industry.