Congress is zeroing in on insider‑trading risks in prediction markets: the PREDICT Act and several companion bills would explicitly forbid federal elected officials, their families and senior appointees from trading on contracts tied to government actions or politically sensitive events, and would attach civil penalties and disgorgement for violations.
Who these bills single out and what they would ban
The PREDICT Act, introduced by Representatives Nikki Budzinski (D‑IL) and Adrian Smith (R‑NE), would bar members of Congress, the President, Vice President, immediate family members and senior political appointees from buying or selling prediction‑market contracts tied to political events or government actions. Violations carry a civil penalty equal to 10% of the transaction value plus disgorgement of any profits, with disgorged funds directed to the U.S. Treasury.
Other measures run parallel to PREDICT: Senator Adam Schiff’s DEATH BETS Act prohibits contracts tied to war, terrorism, assassination or death on federally regulated exchanges, while Senators Jeff Merkley and Amy Klobuchar’s End Prediction Market Corruption Act targets federal officials trading on nonpublic information. Ethics groups including CREW and POGO have publicly supported those restrictions.
| Bill | Sponsor(s) | Primary prohibition | Penalty / target |
|---|---|---|---|
| PREDICT Act | Reps. Nikki Budzinski, Adrian Smith | No trading by members of Congress, President, VP, senior appointees, families on political/government contracts | Civil penalty 10% of transaction + disgorgement to U.S. Treasury |
| DEATH BETS Act | Sen. Adam Schiff | Bans contracts tied to war, terrorism, assassination, death on federally regulated exchanges | Prohibitory; enforcement via federal regulators |
| End Prediction Market Corruption Act | Sens. Jeff Merkley, Amy Klobuchar | Prevents federal officials profiting from nonpublic information in event contracts | Targeted bans; enforcement aims to protect public trust |
Concrete episodes that pushed lawmakers to act
Recent, well‑timed trades on platforms such as Kalshi and Polymarket — including contracts referencing Iran’s Supreme Leader and possible military escalations — prompted congressional attention and press scrutiny. Lawmakers cited these incidents as examples where privileged or advance information could have been used to profit from event contracts, a dynamic unlike ordinary wagers because it intersects with access to classified or nonpublic policy knowledge.
Platforms have responded unevenly: Kalshi and others state internal rules against insider trading and have removed or restricted some sensitive contracts, but members of Congress and ethics groups argue platform policies alone aren’t a reliable substitute for statutory prohibitions and independent enforcement.
How enforcement could work and where to watch next
Most of these bills either expand explicit prohibitions or clarify federal authority — notably the Commodity Futures Trading Commission (CFTC) — to police prediction markets. A key next checkpoint is whether and how the CFTC issues implementing rules or guidance: investigators will need authority to subpoena trading records, tie transactions to specific officials, and calculate disgorgement if the PREDICT Act’s 10% civil‑penalty framework becomes law.
Political dynamics matter: some Republican lawmakers and officials have signaled support for “lawful innovation” in markets; the draft record shows CFTC leadership under former administrations weighing industry growth alongside risk mitigation. That mix suggests congressional language, not just agency pronouncements, will shape the speed and scope of enforcement — so traders should watch bill markups, committee votes and any CFTC rulemaking filings for concrete timing.
Practical checks for traders and platform operators
If you trade or run a platform, expect three actions to materially change your risk profile: (1) formal bans on federal officials and defined family members, (2) explicit prohibitions on violent‑event contracts on regulated exchanges, and (3) new evidence‑based enforcement steps from the CFTC or federal courts. Those are the thresholds that should trigger account reviews, updated terms of service, and enhanced transaction monitoring.
Short Q&A
Q: When would rules take effect? A: If a bill passes, effective dates will be in the statute; in the meantime, CFTC guidance or enforcement priorities could change sooner via notices or staff letters—watch committee calendars and CFTC filings closely.
Q: Do private platforms still get to list violent‑event contracts? A: Schiff’s DEATH BETS Act targets federally regulated exchanges; platforms operating outside such jurisdiction might continue offerings unless a separate state or federal action forbids them. Expect legal challenges and platform policy shifts.
Q: What are practical red flags for insider trading? A: Suspiciously timed large orders by accounts connected to government staff, repetitive profitable bets immediately before public actions, and refusal to produce identity or custody records when regulators request them are signals that should prompt suspension and forensic review.
