Two members of Congress introduced a bill that would ban lawmakers and officials in the executive branch, as well as their children and spouses, from trading on prediction markets related to political events, Politico first reported—the latest effort to prevent officials from using platforms like Polymarket and Kalshi after suspiciously placed bets on policy-related events.
Key Facts
- The bill, dubbed the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading (PREDICT) Act, will be sponsored by Rep. Nikki Budzinski, D-Ill., and Rep. Adrian Smith, R-Neb.
- The ban would extend to members of Congress, as well as the president, vice president and political appointees of the executive branch, as well as direct family members, according to the text of the bill shared with Forbes.
- The bill would prohibit these people from trading on any event with an outcome tied to a political event.
- Violators would face a fine equal to 10% of the transaction they traded on, and would be forced to repay any money won in full to the U.S. Treasury.
- Budzinski told Forbes the bill was introduced on Wednesday.
- Kalshi spokesperson Elisabeth Diana told Forbes the company supports the effort, while Polymarket did not immediately return a request for comment.
Crucial Quote
In an interview with Forbes, Budzinski said she began to look into possible legislation banning politicians from placing prediction market bets after the outbreak of the Iran war. “We found out that there were a very small number of new Polymarket traders that benefited and had very precise timing of a bet on when the United States would strike Iran, and they benefited by well over $1 million on those wagers,” Budzinski said. “And it just raised the question as to whether elected officials and senior level staff—who we have access to often sensitive information when we’re making policy decisions—if that could have been monetized and inappropriately parlayed into a wager.” In a separate statement sent earlier, Budzinski also said she would work with Smith to “ensure that those with access to sensitive information cannot profit from it.”
Key Background
In January, an anonymous trader made over $400,000 betting Venezuelan President Nicolas Maduro would leave office—just hours before the Trump administration carried out a military operation to kidnap the Venezuelan leader from Caracas and extradite him to the U.S. Days after the controversial payout, Rep. Ritchie Torres, D-N.Y. introduced the Public Integrity in Financial Prediction Markets Act, a bill that would ban government officials from placing bets on prediction markets only if they had “material nonpublic information.” Since then, several other legislative initiatives have tried to tackle the problem, primarily sponsored by Democrats. Sen. Jeff Merkley, D-Ore., and Sen. Amy Klobuchar, D-Minn., sponsored the End Prediction Market Corruption Act earlier in March, offering a similar all-encompassing ban to the one proposed by Budzinski and Smith. Sen. Chris Murphy, D-Conn., and several members of Congress including Rep. Greg Casar, D-Texas, introduced an even more restrictive bill last week, banning all prediction market bets on terrorism, war, assassinations and the broad category of “events where an individual knows or controls the outcome.” In a press release, the lawmakers specifically cited bets placed on the Super Bowl Halftime Show as an example, claiming they were “likely driven by leaks and inside knowledge.”
What Makes This Bill Different?
Budzinski said the new bill is focused specifically on officials in the White House, members of Congress and senior level staff. Her bill would also refer questions about inappropriate wagers to the House Ethics Committee, which would enforce the proposed penalties. Budzinski also noted that she worked with her Republican colleague Smith on this bill, and said the bipartisan nature of the new law could give it more of a chance to pass through the Republican-controlled House and Senate. “I hope that we will be able to attract co-sponsors on both sides of the aisle and get this passed into law.” The new bill is also specifically focused on prediction market trades based on politics and policy. “So if a chief of staff on the Hill still wants to utilize Polymarket to make March Madness bets and wagers, they can totally feel free to do that,” Budzinski said. “But if they want to place a wager on when DHS is going to reopen, that would not be permissible.”
Tangent
On Monday, another bipartisan bill was introduced to regulate sports betting on prediction market sites. Sen. John Curtis, R-Utah, and Sen. Adam Schiff, D-Calif., proposed an amendment to the Commodity Exchange Act to explicitly ban “sports and casino-style games” on prediction markets.
How Have Prediction Markets Responded?
“We already ban insider trading by government officials on Kalshi and impose penalties for violations,” Diana said, noting support for the bill. “Formalizing this and making it an industry standard for all prediction markets is a welcome measure.” Polymarket did not immediately comment on the new proposed legislation, but both markets have made moves in the past few days to update their own rules in response to the mounting pressure. On Monday, Kalshi announced new “preemptive screening” policies for politicians and athletes, blocking candidates from trading contracts on their own campaigns and athletes from making trades based on sports or leagues they are currently affiliated with. Polymarket announced updated rules the same day, banning trades on stolen or confidential information, as well as trades from people who can influence the outcome of an event. Budzinski told Forbes her office was meeting with the industry as well.
This article was originally published on forbes.com.
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