US Lawmaker Proposes Ban on Prediction-Market Insider Trading by Members of Congress

Prediction markets let traders buy event contracts tied to real-world outcomes and argue the products are federally regulated derivatives rather than gambling. The Commodity Futures Trading Commission oversees such markets in the US. Wildfire contracts are especially sensitive because, unlike hurricanes or earthquakes, their outcomes can be directly altered by human action. Critics say the wagers could reward arson, give firefighters or officials with nonpublic information an edge, and allow traders to profit from devastated communities.

On Aug. 4, nine Democratic US senators asked CFTC Chairman Michael Selig to prohibit wildfire event contracts on domestic designated contract markets and address similar trading on offshore platforms. The lawmakers cited more than $1.2 million wagered on Polymarket during the Palisades and Eaton fires in January 2025. Those Southern California blazes killed 31 people and destroyed more than 16,000 structures. They asked the agency to say whether such contracts serve the public interest and to outline any planned guidance or enforcement by Aug. 14.

Kalshi and Polymarket allow users to wager on political, military and sporting outcomes through event contracts. Such products are regulated by the U.S. Commodity Futures Trading Commission, but have raised fairness concerns because people with access to confidential information could profit from them. In January 2026, a trader made more than $409,000 by betting on political developments in Venezuela.

On March 23, 2026, Kalshi barred candidates from betting on their own elections and prohibited sports insiders from trading related contracts. Polymarket also banned people with confidential information or the ability to influence outcomes from placing bets. On May 22, the U.S. House Committee on Oversight and Government Reform launched an investigation, saying more than 80 Polymarket users were linked to suspicious trades, and ordered both platforms to provide KYC and monitoring data by June 5.

Polymarket allows traders to use crypto assets to bet on political and military events, but publicly visible on-chain positions could also serve as intelligence signals. Bubblemaps suspects that some traders had access to nonpublic information before a U.S. military operation. If hostile nations used such activity to assess the timing of operations, the consequences could extend beyond insider trading and endanger military personnel and civilians.

Bubblemaps said on May 18, 2026, that nine accounts placed bets before the U.S. strike on Iran on February 28, recording a 98% win rate across 80 trades and earning more than $2.4 million. Trading volume in military-related contracts has exceeded $1 billion this year. Mike Levin and Adam Schiff subsequently introduced the DEATH BETS Act to ban war contracts, while Polymarket said it had deployed AI and blockchain forensics for monitoring.

Prediction markets allow traders to wager on the outcomes of events such as elections, wars and policy decisions. Because senators and staff may have access to nonpublic government information, such bets raise concerns about conflicts of interest and insider profiteering. A week before the vote, an active-duty member of the US military was accused of using classified information to bet on the arrest of former Venezuelan President Maduro, earning more than $400,000 and highlighting the ethical risks for public officials.

On April 30, 2026, the US Senate unanimously approved S. Res. 708, introduced by Republican Senator Bernie Moreno, amending Standing Rule 37 with immediate effect. An amendment by Democratic Senator Alex Padilla extended the ban to all senators, officers and employees. The resolution also urged the House of Representatives and the executive and judicial branches to adopt similar restrictions.

Prediction markets such as Polymarket and Kalshi allow users to wager on political and military outcomes through event contracts. Participation by officials with access to classified information could enable insider profits and even distort wartime decisions. The controversy arose after an account wagered on Nicolás Maduro’s removal before a U.S. military raid in Venezuela in January and made more than $400,000.

On March 17, 2026, Democratic Representative Greg Casar and Senator Chris Murphy introduced the BETS OFF Act, which would prohibit officials from using nonpublic information to bet on sensitive government actions. On March 29, more than 40 Democratic lawmakers also wrote to the Commodity Futures Trading Commission and the Office of Government Ethics, seeking executive-branch guidance and an investigation into nearly $1 million in suspicious profits made before the Iran attack.

Prediction markets such as Kalshi and Polymarket allow users to trade on sports outcomes through CFTC-regulated “event contracts,” potentially bypassing state gambling licenses, age restrictions and consumer-protection rules. Sports have become a major source of trading activity for the platforms. The clash between federal derivatives oversight and state gambling jurisdiction is now central to whether the industry can continue expanding.

On March 23, 2026, Democratic Senator Adam Schiff and Republican Senator John Curtis introduced the Prediction Markets Are Gambling Act, which would prohibit CFTC-registered operators from listing contracts resembling sports bets or casino games. Trading volume in contracts on that month's March Madness champion exceeded $100 million, while Super Bowl-related trading volume surpassed $1 billion in 2026.