New Bill Seeks to Prohibit Government Officials From Trading on Polymarket and Kalshi

Key Highlights

• New legislation would prohibit federal officials, including Congress members and the president, from wagering on prediction market platforms
• Penalties include a 10% fine on trade value plus mandatory return of all profits to federal coffers
• Legislation emerges after questionable wagers on Iran military action generated over $1 million in profits
• Kalshi has endorsed the proposed legislation; Polymarket remains silent on the matter
• Both prediction market operators implemented new internal policies on Monday before the bill’s introduction

A bipartisan coalition of US legislators has proposed sweeping restrictions preventing politicians and high-ranking government officials from participating in prediction market trading. The proposed legislation, known as the PREDICT Act, was jointly introduced by Democratic Representative Nikki Budzinski of Illinois alongside Republican Representative Adrian Smith from Nebraska.

The proposed legislation specifically addresses platforms such as Polymarket and Kalshi, where participants can place wagers on political developments, governmental policy outcomes, and official actions.

The PREDICT Act would institute a comprehensive prohibition covering congressional representatives, the president, vice president, and appointed officials from engaging in trades on these platforms. The restriction would additionally apply to their immediate family members, including spouses and dependent children.

Violators would incur financial penalties calculated at 10% of their total transaction amount. Additionally, they must surrender all generated profits directly to the United States Treasury.

The legislative push follows troubling patterns in betting behavior. A limited group of participants earned more than $1 million on Polymarket through wagers predicting the exact timing of US military strikes against Iran.

In a separate incident earlier this year, an unidentified participant secured over $400,000 by wagering that Venezuelan leader Nicolas Maduro would vacate his position, placing these bets merely hours prior to a US military intervention designed to remove him from power.

Representative Budzinski emphasized that these incidents generated serious concerns about whether individuals with privileged access to classified government intelligence were exploiting that information for financial gain on prediction markets.

Expanding Legislative Response

The PREDICT Act represents just one component of multiple legislative initiatives targeting prediction market operations introduced during recent weeks. Senator Chris Murphy, along with colleagues, presented legislation that would prohibit all wagers related to terrorism, armed conflict, and political assassinations. Senators Jeff Merkley and Amy Klobuchar unveiled their End Prediction Market Corruption Act during early March.

On Monday, Senators John Curtis and Adam Schiff jointly introduced additional bipartisan legislation aimed at banning sports gambling and casino-style wagering contracts on prediction market platforms registered with the CFTC.

At the state level, eleven states have initiated legal proceedings against prediction market operators, while two additional states have cases currently under consideration.

Platform Reactions and Policy Updates

Kalshi confirmed it currently prohibits insider trading by government personnel and characterized the proposed bill as a “welcome measure.” The platform expressed support for establishing uniform industry standards.

Polymarket has not issued any statement regarding the proposed legislation and did not respond to media inquiries.

Both platforms announced revised internal policies on Monday. Kalshi revealed enhanced screening procedures that prevent politicians from wagering on their own electoral campaigns and bar athletes from betting on sports competitions in which they participate. Polymarket instituted prohibitions against trading based on misappropriated or confidential data and trading by individuals capable of influencing an event’s result.

Representative Budzinski confirmed that her office maintains ongoing discussions with prediction market industry representatives as the legislation advances through the congressional process.

The PREDICT Act would delegate suspected violations to the House Ethics Committee for investigation and enforcement. According to Budzinski, the bipartisan nature of the legislation enhances its prospects for approval in both the Republican-controlled House of Representatives and Senate.

The proposed legislation does not impose a blanket prohibition on political staff participating in prediction markets. A congressional chief of staff, for example, could continue placing wagers on sporting events such as March Madness tournaments, but would be restricted from betting on governmental policy matters such as federal agency reopening timelines.

The post New Bill Seeks to Prohibit Government Officials From Trading on Polymarket and Kalshi appeared first on Blockonomi.