U.S. Lawmakers Seek Ban on Crypto Prediction Markets Over National Security Risks

Polymarket allows users to trade crypto-based contracts tied to real-world outcomes, but markets involving military operations and defense decisions risk turning classified information into profit. A research report found that a group of wallets repeatedly made highly accurate military wagers, raising suspicions that some traders may have had access to nonpublic information and exposing a regulatory gap around national security and insider activity in decentralized prediction markets.

More than 150 crypto wallets recorded a 97.2% win rate on military-related bets, according to the report. Their unusual performance reportedly drew automated trading bots and large holders seeking to copy the positions, potentially amplifying the consequences of any intelligence leak. The researchers recommended mandatory know-your-customer checks and urged regulators to consider banning markets tied to sensitive secrets. The available report did not identify the research institution, disclose the amount wagered or provide a publication date.

Prediction markets such as Kalshi and Polymarket allow users to trade event contracts tied to election and policy outcomes. Because members of Congress have access to nonpublic government information, placing such wagers could create conflicts of interest and raise insider-trading concerns. Congress is therefore seeking to extend existing financial-trading ethics rules to the rapidly growing prediction-market industry.

On June 18, 2026, Wisconsin Republican Representative Bryan Steil, chairman of the House Administration Committee, introduced the Stop Lawmakers from Predicting Act. It would bar members of Congress, their spouses and dependent children from trading event contracts involving government policies, actions and political outcomes. Violators would have to pay the greater of $2,000 or 10% of the transaction value, plus their net profit. The bill does not cover White House officials.

Kalshi and Polymarket offer sports predictions through event contracts regulated by the US Commodity Futures Trading Commission, creating a regulatory disparity with traditional gaming operators that must obtain licenses and pay taxes in each state. Sports have become a core growth driver for the platforms, meaning their potential inclusion in the CLARITY Act could affect federal, state and tribal jurisdiction as well as a major source of platform revenue.

On June 16, 2026, more than 60 groups, including the American Gaming Association, the Indian Gaming Association and the Association of Gaming Equipment Manufacturers, sent a letter to the Senate seeking an explicit ban on sports and casino-style contracts. Kalshi recorded $16.81 billion in trading volume in May, compared with $7.08 billion for Polymarket. The bill’s next step is a vote by the full Senate.

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.

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.