The U.S. Congress is preparing a ban on betting on Polymarket and Kalshi: a new blow to prediction markets
A serious conflict of interest is brewing in American politics. Republican Bryan Steil, Chairman of 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 betting on political outcomes and government decisions through prediction platforms such as Kalshi and Polymarket.
Steil's initiative is a direct response to growing concerns that lawmakers could use non-public information for personal enrichment on prediction markets. Essentially, it is an attempt to curb insider trading in a new, digital guise. As Steil himself rightly noted, the job of congressmen is to write laws, not to bet on their outcomes. And that is hard to argue with.
What exactly does the law propose?
The bill builds on the ideas of the earlier "Stop Insider Trading Act," which the committee approved on January 14. The new document introduces strict restrictions. It bans 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 illegally obtained profits must be returned in full.
An important nuance: the fine cannot be paid using official funds, the Senate budget, or political donations. Those who resign without settling the debt may be referred to the U.S. Department of Justice for a civil lawsuit. At the same time, the law does not affect bets on non-political events, such as sports. This underscores its targeted focus specifically against abuses of official position.
The battlefield expands
Steil's bill is just one part of a broader crackdown on prediction markets. In March, Senators Todd Young, Elissa Slotkin, John Curtis, and Adam Schiff introduced their own "Public Integrity in Financial Prediction Markets Act," aimed at combating insider trading on any platform. In the House of Representatives, the "PREDICT Act" is moving forward with similar measures for the families of officials. Earlier, the Senate separately banned senators and their staff from betting on prediction markets.
Notably, platform operators themselves are preparing for stricter rules. In June, Kalshi launched a risk assessment system and whistleblower channels to prevent insiders from accessing the platform. Polymarket, meanwhile, has brought in Chainalysis and is building an online monitoring system. The market clearly realizes that playing a cat-and-mouse game with regulators could end badly.
My analysis: This trend is just the tip of the iceberg. Prediction markets, especially those on the blockchain, have long existed in a "gray zone." What we are seeing now is a classic process: as soon as a tool begins to pose a real threat to established political and financial elites, restrictions are immediately imposed. For investors, this is a signal: in the short term, such bills could reduce liquidity and volatility on Polymarket and Kalshi. However, in the long term, legalization and regulation could, on the contrary, open the door for institutional players, leading to a new wave of growth in this sector.