More than 40 House and Senate Democrats have asked federal regulators to warn government employees that using inside information to bet on prediction markets is illegal — and that contracts on platforms such as Polymarket and Kalshi qualify as derivatives subject to that prohibition.
In a March 29 letter, Senate Banking Committee ranking member Elizabeth Warren and Senate Agriculture ranking member Cory Booker joined dozens of colleagues in urging Commodity Futures Trading Commission Chair Mike Selig and leaders of the U.S. Office of Government Ethics (OGE) to “circulate executive branch–wide guidance explaining that federal employees must refrain from insider trading in prediction markets.” The lawmakers said recent suspicious betting patterns on event contracts suggest people with special insight into government outcomes may have profited from nonpublic information.
U.S. derivatives law bars government officials from trading on material nonpublic information learned on the job. Because the CFTC has classified prediction-market contracts as regulated derivatives, the Democrats argued the ban should apply to bets on outcomes such as alleged military actions in Venezuela and Iran, the length of a speech by President Donald Trump’s press secretary, and the firing of former Department of Homeland Security Secretary Kristi Noem — examples cited in the letter.
The appeal was also signed by top Democrats on the House Agriculture Committee, Rep. Angie Craig, and the House Financial Services Committee, Rep. Maxine Waters; both agriculture committees have congressional oversight of the CFTC. The move underscores growing scrutiny of prediction markets from legislators already focused on crypto policy — many of the signatories are involved in work around the stalled Digital Asset Market Clarity Act.
The CFTC under Selig has been drafting new rules for prediction-market firms, and federal prosecutors reportedly have spoken with those platforms to evaluate whether some trades could trigger insider-trading investigations. The lawmakers’ request asks regulators to make clear to all federal employees that existing insider-trading laws apply to prediction-market activity, and to remind staffers of their legal obligations.
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