Two U.S. lawmakers are aiming to keep government officials from trading event contracts on prediction market platforms like Kalshi and Polymarket.
Key Takeaways
- Proposed legislation would make it illegal for the President, Vice President, and Congressional members to trade on prediction market platforms.
- Lawmakers are concerned about recent controversial markets and potential inside information.
- Kalshi supports the bill and was consulted before it was released.
Sens. Jeff Merkley (D-Oregon) and Amy Klobuchar (D-Minnesota) introduced the End Prediction Market Corruption Act on Thursday, a bill that would ban the President, Vice President, members of Congress, and other public officials from purchasing contracts for profit at a time when insider information and market manipulation have become a concern among politicians.
Lawmakers’ efforts come after Kalshi and Polymarket recently experienced a surge of trades on the war with Iran markets and the ousting of Supreme Leader Ali Khamenei just before the conflict began.
“When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits,” Merkley said in a statement.
“Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.”
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Push for regulation
The bill calls for the Attorney General to take “civil action” on senior executive branch officers with a proposed fine of $10,000 and the amount profited from trading on prediction market platforms.
The bill is cosponsored by Sens. Chris Van Hollen (D-Maryland) and Adam Schiff (D-California), but received no endorsement from Republicans, who currently control Congress. That could make the passing of the bill difficult, but lawmakers hope that the End Prediction Market Corruption Act will spark more efforts of regulation.
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct,” Klobuchar said. “This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain.”
Lawmakers also recently asked new Commodity Futures Trading Commission chair Michael Selig, whose agency oversees and regulates prediction markets, to ban platforms from offering markets on death, injury, and war.
Kalshi’s support
Merkley consulted with Kalshi for input before introducing the End Prediction Market Corruption Act. Kalshi told CNBC in a statement that the trading exchange supports policing insider trading.
“In the past few months, we’ve had outreach from policymakers about work they’re doing to ensure market integrity, and we’re in talks with many of them, including Senator Merkley,” Kalshi said in the statement.
This legislative effort also comes at a time when Kalshi, Polymarket, and other trading platforms are in the midst of court battles with states over sports event contracts that regulators say are illegal and unlicensed sports betting.
