More than 40 House and Senate Democrats have asked federal regulators to warn government employees that betting on prediction markets with inside information can amount to illegal insider trading — and that platforms such as Polymarket and Kalshi fall squarely under that ban.
In a March 29 letter, Senate Judiciary ranking members on financial oversight — including Sen. Elizabeth Warren (top Democrat on the Senate Banking Committee) and Sen. Cory Booker (ranking Democrat on the Senate Agriculture Committee) — urged Commodity Futures Trading Commission (CFTC) Chair Mike Selig and leaders at the U.S. Office of Government Ethics (OGE) to issue executive-branch-wide guidance reminding federal employees that derivatives laws prohibit trading on non-public government information. The letter was also signed by House Democrats including Rep. Angie Craig (top Democrat on the House Agriculture Committee) and Rep. Maxine Waters (top Democrat on the House Financial Services Committee); the agriculture committees in both chambers directly oversee the CFTC.
The request follows a wave of reports that some prediction-market contracts — wagers on government or military actions — attracted suspiciously prescient bets that suggested the bettors had special insight into outcomes. The letter cites examples such as contracts tied to potential military actions in Venezuela and Iran, wagers on the length of a White House press briefing, and trades around reported personnel moves. Because the CFTC has classified many prediction-market contracts as regulated derivatives, the lawmakers say the statutory ban on government officials trading on nonpublic information should apply to these platforms.
“We ask that the CFTC and OGE issue guidance reminding federal employees of their existing legal obligation to refrain from using their insider governmental information to profit from prediction market trades,” the letter states.
The move comes as the CFTC develops a new policy framework for prediction markets — businesses that sit at the intersection of derivatives and the crypto ecosystem — and as lawmakers continue to debate broader crypto legislation, including the Digital Asset Market Clarity Act stalled in the Senate. Separately, federal prosecutors have reportedly contacted prediction-market firms to determine whether any of the suspicious trades could trigger insider-trading investigations.
The lawmakers’ appeal aims to close any ambiguity for federal employees and ensure established insider-trading rules are enforced as prediction markets grow and attract more attention from regulators and investigators.
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