Democrats Push for Insider Trading Crackdown on Prediction Markets

More than 40 Democratic lawmakers have formally urged federal regulators to issue government-wide guidance clarifying that insider trading on prediction market platforms — such as Polymarket and Kalshi — is illegal under existing U.S. derivatives law.

Senator Elizabeth Warren, ranking member of the Senate Banking Committee, and Senator Cory Booker of the Senate Agriculture Committee led the effort, co-signing a letter dated March 29 addressed to Commodity Futures Trading Commission Chairman Mike Selig and officials at the U.S. Office of Government Ethics. The lawmakers called on both agencies to remind all executive branch employees of their legal obligation to avoid profiting from prediction market trades using non-public, government-acquired information.

The push comes amid growing scrutiny over a string of suspicious betting patterns on event contracts tied to sensitive government and military decisions. Specific concerns raised in the letter involved contracts related to potential military action in Venezuela and Iran, the duration of a White House press briefing, and the abrupt dismissal of former Department of Homeland Security Secretary Kristi Noem. These patterns fueled suspicion that individuals with privileged access to government intelligence may have placed financially advantageous bets ahead of public announcements.

Because the CFTC has already classified prediction market contracts as regulated derivatives, lawmakers argue that federal insider trading prohibitions clearly apply. Top House Democrats on the Agriculture and Financial Services Committees — Representatives Angie Craig and Maxine Waters — also signed the letter, underscoring bipartisan concern over regulatory gaps in this emerging space.

The CFTC is currently developing updated policies for the prediction market industry, which has deep ties to the broader cryptocurrency sector. Separately, federal prosecutors have reportedly begun reaching out to prediction market companies to evaluate whether specific trades could form the basis of insider trading cases, signaling that legal scrutiny of the industry is intensifying.