Democratic Lawmakers to Introduce Bill Banning Government Official Trading on Inside Information via Prediction Markets This Week

Rep. Ritchie Torres (D-N.Y.) is set to introduce legislation this week to address potential insider trading on prediction markets. The bill, known as the Public Integrity in Financial Prediction Markets Act of 2026, would prohibit federal officials from trading on platforms like Polymarket and Kalshi when they have nonpublic information.

The legislation comes after a $32,000 bet on the removal of Venezuelan President Nicolás Maduro was settled for over $400,000 in less than 24 hours. According to reports, the trade was placed days before U.S. forces reportedly captured Maduro, raising questions about how the information was obtained.

This move mirrors existing insider trading regulations in traditional financial markets and aims to extend those standards to the rapidly growing prediction market sector. The bill would cover elected officials, political appointees, and executive branch employees.

Why Did This Happen?

The recent trade on Maduro's ouster has intensified scrutiny over how prediction markets can be used to exploit nonpublic information. The bet was made by a newly created account on Polymarket, with limited prior activity, fueling concerns about potential misuse of insider information.

In response, some lawmakers are pushing for stricter oversight. The bill aligns with the STOCK Act and seeks to apply similar ethical and legal standards to prediction markets. This includes a ban on trading when individuals have access to material nonpublic information.

How Did Markets Respond?

The announcement has sparked varied reactions from market participants and platforms. Kalshi noted that its existing rules already prohibit insider trading by decision-makers or individuals with material nonpublic information.

Polymarket, by contrast, does not currently have explicit restrictions on insider trading. CEO Shayne Coplan has previously argued that insider trading on prediction markets can serve a public good by incentivizing information sharing.

What Are Analysts Watching Next?

The proposed bill is expected to face scrutiny from both proponents and critics. Analysts are watching how it will be received by Congress and how it might affect the broader prediction market ecosystem.

Regulatory clarity is a key concern for market participants. If the bill passes, it could establish a new framework for oversight, affecting how prediction markets are used by government officials and other stakeholders.

Investors and traders are also looking for updates on how platforms like Polymarket and Kalshi will respond. With the sector growing rapidly, the need for clear rules is becoming more pressing.

The next steps will likely involve congressional review and potential amendments before the bill moves toward a vote. Investors and analysts will be closely monitoring developments in the coming weeks.