Summary: Two U.S. Democratic senators are introducing a bill to ban high-ranking government officials, including members of Congress and the president, from trading on prediction markets. This follows incidents where anonymous users profited from large bets on geopolitical events like U.S. strikes on Iran shortly before they occurred. The proposed legislation aims to prevent insider trading by officials and includes penalties like fines and the forfeiture of profits.
Main Topics Covered:
1. The proposed legislative ban on prediction market trading for U.S. government officials.
2. Recent high-profile, profitable bets on geopolitical events that prompted the bill.
3. The operation and regulatory status of prediction market platforms like Polymarket and Kalshi.
4. The stated goal of preventing insider trading and maintaining public trust in government.
Senators propose ban on US gov’t officials doing prediction market trading
The bill comes as an anonymous user on Polymarket made more than $500,000 by taking a position that the United States would strike Iran hours before it happened.
Two United States Democratic Senators are set to introduce legislation barring members of Congress, the president, and vice president from trading event contracts on prediction market platforms like Kalshi and Polymarket.
Senators Jeff Merkley, a Democrat from Oregon, and Amy Klobuchar, a Democrat from Minnesota, are set to introduce on Thursday a bill banning lawmakers from trading, according to CNBC, which first reported the story.
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The legislation, if passed, would also curtail other members of the executive branch from profiting on the platforms, or face fines of at least $10,000 for each violation.
The bill also states that violators will have to pay back profits made in trades.
The legislation comes as prediction markets are in the spotlight after a few anonymous bettors profited on positions that the US would strike Iran. The bets were made on Polymarket, a platform on which traders can buy and sell anonymously, within 24 hours of the strike.
Only weeks earlier, another user made more than $400,000 on Polymarket betting on the removal of Venezuelan President Nicolas Maduro from office, only hours before the US’s abduction of Maduro.
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct. 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,” Klobuchar said in a statement shared with Al Jazeera.
Prediction markets allow users to make wagers on future events ranging from election outcomes and monetary policy decisions to sports games and military strikes.
“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,” Senator Merkley said in a statement shared with Al Jazeera.
The two major players in the prediction markets are Kalshi and Polymarket.
Kalshi is the only fully regulated exchange in the US. Polymarket, on the other hand, was banned in the US for three years in 2022. It entered the US market for traders late last year, but is so far only cleared for sports betting. Americans can view other positions but are unable to wager. While US users are banned, a CoinDesk investigation found that Americans have been using the platform through VPNs.
“We support Congress and regulators taking action to police insider trading, and keep prediction markets onshore and under federal regulation. In the past few months, we’ve had outreach from policymakers from both sides of the aisle about work they’re doing to ensure market integrity, and we’re in talks with many of them, including Senator Merkley,” a spokesperson for Kalshi told Al Jazeera in a statement.
Polymarket did not respond to Al Jazeera’s request for comment.
The legislation comes amid a wave of new political pressure on the sector. Democratic Senator Chris Murphy of Connecticut is also working on legislation to curb the industry, including barring trades made on government actions.
At the same time, a new conservative coalition, led by former White House Office of Management and Budget director Mick Mulvaney, wants the industry to be regulated more akin to sports betting.
Meridiano
