U.S. Lawmakers Propose Ban on Politician Trading in Prediction Markets

U.S. lawmakers introduced a new bill in early 2026 to restrict political insiders from trading in prediction markets tied to government policy and political outcomes according to Rep. Ritchie Torres. The legislation, called the Public Integrity in Financial Prediction Markets Act of 2026, aims to prevent conflicts of interest and potential insider trading by elected officials and government employees as reported by Business Insider. The bill follows a high-profile trade on Polymarket that yielded over $400,000 in profits just hours before a U.S. military operation captured Venezuelan President Nicolás Maduro citing CoinTelegraph.

The suspicious timing of the bet raised concerns that the trader had non-public information about the operation. The anonymous account placed the trade just one day before the raid occurred, leading to speculation that it may have involved a government insider according to Business Insider. The account has since disappeared from Polymarket, with its page returning an error message as reported by CoinTelegraph. The unusual transaction highlights the need for regulation to prevent government officials from exploiting prediction markets for personal gain according to Rep. Ritchie Torres.

Why Did This Happen?

Rep. Ritchie Torres (D-N.Y.) introduced the bill in response to the Maduro bet, which he described as having 'all the hallmarks of potential insider trading' according to Front Office Sports. The bill would bar federal elected officials, political appointees, and executive branch employees from trading in markets related to government policy or political outcomes if they have access to nonpublic information as detailed by Rep. Torres. Torres emphasized that prediction markets should not allow insiders to profit from decisions they influence according to Business Insider.

The bill has the support of over 30 Democratic lawmakers, including former Speaker of the House Nancy Pelosi according to Front Office Sports. Torres hopes to gain Republican support in the future, though the bill is currently not bipartisan as noted by Front Office Sports. The legislation is intended as a first step in addressing the regulatory gap, with Torres acknowledging the need for broader regulation of prediction markets according to Business Insider.

How Did Markets Respond?

Prediction market platforms like Polymarket and Kalshi have different policies on insider trading. Kalshi explicitly prohibits insider trading and would have barred a government official from the Maduro trade according to Business Insider. Polymarket, however, has no such restrictions and allows some users to remain anonymous as reported by The Atlantic. Polymarket's CEO, Shayne Coplan, has even argued that insider trading can be beneficial by incentivizing the release of information according to The Atlantic.

The controversy over the Maduro bet has sparked broader regulatory scrutiny. New York lawmakers introduced the ORACLE Act in 2025, which would bar prediction markets from offering sports betting contracts and impose strict operational rules on platforms according to Gambling Insider. The bill is currently under review by the Assembly Committee on Consumer Affairs and Protection as reported by Gambling Insider.

What Are Analysts Watching Next?

The Public Integrity in Financial Prediction Markets Act of 2026 is not expected to comprehensively regulate prediction markets, but it is seen as a starting point for more detailed oversight according to Rep. Ritchie Torres. If enacted, the legislation would take effect one year after passage, giving platforms time to adjust their operations according to Gambling Insider.

Experts argue that insider trading in prediction markets can distort market liquidity and reduce the reliability of price signals according to Rep. Ritchie Torres. Prediction markets function best when participants have equal access to information, and insider trading undermines that balance according to The Atlantic. If the bill passes, it would set a precedent for future regulation and help prevent conflicts of interest between government officials and market participants according to Rep. Ritchie Torres.

The Trump administration has already expressed interest in developing its own prediction market, called Truth Predict according to The Atlantic. This raises questions about whether the new bill would apply to government-affiliated platforms and how it would be enforced in practice according to The Atlantic.

Prediction markets are currently regulated by the Commodity Futures Trading Commission (CFTC) in the U.S. However, the boundaries between prediction markets, gambling, and traditional financial markets remain unclear according to State Capital Lobbyist. This legal ambiguity has led to enforcement actions by state attorneys general and growing interest from lawmakers in crafting statutory frameworks for prediction markets according to State Capital Lobbyist.

If the bill passes, it would mark a significant shift in how prediction markets are regulated in the U.S. and could influence similar efforts in other states according to Rep. Ritchie Torres. The outcome of this legislative effort will have important implications for investors, traders, and policymakers involved in prediction markets according to Rep. Ritchie Torres.

The proposed legislation reflects a growing concern over the ethical implications of prediction markets when accessed by individuals with insider knowledge according to Rep. Ritchie Torres. Prediction markets are intended to aggregate information and predict future events, but they become problematic when participants can exploit nonpublic information for profit according to The Atlantic.

The bill's supporters argue that it would help maintain public trust in government institutions and prevent conflicts of interest between elected officials and market participants according to Rep. Ritchie Torres. If enacted, the legislation would align with broader efforts to strengthen oversight of digital financial platforms and ensure fair access to information for all market participants according to Rep. Ritchie Torres.

The bill's effectiveness will ultimately depend on enforcement and compliance with its provisions. Prediction market platforms would need to develop mechanisms to verify that users are not government insiders with access to nonpublic information according to Rep. Ritchie Torres. The bill also raises questions about how to define 'material nonpublic information' in the context of prediction markets, which differ from traditional financial markets in their structure and purpose according to Rep. Ritchie Torres.

For now, the bill remains in the early stages of the legislative process. Its passage will depend on political support, public sentiment, and the ability of lawmakers to craft clear and enforceable provisions according to Rep. Ritchie Torres.

Prediction markets are likely to remain a topic of regulatory interest in the coming months as their popularity grows and their role in financial and political forecasting expands according to Rep. Ritchie Torres. The debate over how to regulate these markets will continue to evolve as new cases of suspicious trading emerge and as lawmakers seek to balance innovation with oversight according to Rep. Ritchie Torres.