U.S. lawmakers are preparing a ban on betting through Kalshi and Polymarket: a new blow to prediction markets
Republican Congressman from Wisconsin, Chairman of the House Committee on Administration Bryan Steil, has introduced the Stop Lawmakers from Predicting Act. This initiative directly prohibits members of Congress, their spouses, and minor children from placing monetary bets on political events and government decisions using prediction platforms, including giants like Kalshi and Polymarket.
The trigger for such a stringent measure stems from well-founded concerns: lawmakers, possessing exclusive access to confidential information, could use it to gain an unfair advantage on prediction markets. Essentially, this is the classic problem of insider trading, but in a new, digital guise.
What exactly does the bill prohibit?
The document is a logical extension of the Stop Insider Trading Act, which the committee approved on January 14. The new version aims to restore trust in public officials. As Steil himself stated: "Americans must be confident that their congressman is not profiting from insider information. Lawmakers should write laws, not bet on their outcomes."
The ban applies to bets on specific government decisions, actions of authorities, and outcomes of political events. Violators face a significant fine — $2,000 or 10% of the bet amount (whichever is greater). All profits obtained must be returned. Notably, the fine cannot be paid from official expenses, Senate funds, or political donations. Moreover, an unpaid debt may be referred to the Department of Justice for a civil lawsuit, even after the violator's resignation. Importantly, the law does not affect bets on non-political events, such as sports.
Platforms and Congress prepare for new rules
Steil's bill is just part of a broader trend toward tightening control. 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 of confidential information on any platform. In the House of Representatives, there is also a parallel PREDICT Act with similar measures for officials' families. Earlier, the Senate separately banned prediction market bets for senators and their staff.
Market operators themselves are not standing idly by. In June, Kalshi launched a risk assessment system, employment verification, and whistleblower channels to prevent insiders from entering the platform. Polymarket has brought in Chainalysis and is building an online monitoring system.
My analysis: Steil's initiative is not just another bill, but a signal that regulators are seriously cracking down on prediction markets. If it passes, it will create a powerful precedent that could significantly limit the liquidity and appeal of political contracts on platforms like Polymarket. For investors, this means increased legal risks and the need for more thorough due diligence, especially when dealing with contracts related to government administration.