A bipartisan group in the US House of Representatives has introduced the PREDICT Act, aiming to bar top federal figures from using prediction market platforms to profit from political and government-related outcomes. This legislative push comes after revelations that a small cohort of market participants amassed over $1 million on Polymarket by accurately forecasting the timing of US military action against Iran.
Scope Of The Proposed Ban
The PREDICT Act would institute clear prohibitions for members of Congress, the president, the vice president, and appointed officials from trading on platforms facilitating bets on political events and government decisions. Coverage extends to close family members, specifically spouses and dependents. Any federal official found breaking the law would be subject to a penalty of 10% of the total transaction value, alongside mandatory forfeiture of all related profits, which must be remitted to the US Treasury.
Incidents Leading To Legislative Action
Scrutiny of these markets intensified following suspicious activity involving sensitive geopolitical predictions. One notable case saw over $400,000 in profit realized from stakes predicting that Venezuelan leader Nicolas Maduro would depart his post just hours ahead of a US military intervention. These episodes raised alarms about possible exploitation of privileged access to government intelligence, with Representative Nikki Budzinski—the Act’s Democratic co-sponsor—noting the gravity of officials leveraging classified information for potential personal gain through such platforms.
Kalshi and Polymarket are two notable companies in the prediction market sector. Kalshi, registered with US regulators, allows participants to speculate on significant real-world events, ranging from politics to economic data. Polymarket, which operates as a blockchain-based platform, similarly facilitates user wagers on globally relevant questions. Kalshi has voiced strong support for explicit bans on insider trading by government personnel, calling the proposed reforms a positive move for market integrity. Polymarket, on the other hand, has not provided any public comment regarding the legislation.
Kalshi underscored its endorsement of industry-wide standards, stating the bill represents a welcome step and confirming that it already blocks government insiders from certain types of participation.
Both operators recently revised internal compliance frameworks even before the bill’s formal debut. Kalshi detailed stricter controls preventing politicians from speculating on their own campaigns and restricting athletes’ market participation within their own fields. Polymarket updated its terms, now barring trades based on unauthorized or secret information and prohibiting those capable of determining event outcomes from participating.
The PREDICT Act is just one in a growing field of legislative proposals targeting prediction markets. Senators Chris Murphy, Jeff Merkley, and Amy Klobuchar have introduced separate bills, targeting contracts related to terrorism, armed conflict, and corruption within these platforms. Complementary legislation addressing related themes was also presented this week by Senators John Curtis and Adam Schiff. Meanwhile, several states have taken up lawsuits against market operators, further reflecting the rising scrutiny of the sector.
The Act would assign enforcement responsibilities to the House Ethics Committee, tasking the body with investigating and sanctioning any violations. Representative Budzinski emphasized ongoing engagement with industry representatives as discussions with congressional colleagues continue. She also noted that the bipartisan nature of the bill boosts its outlook in both chambers of Congress.
Notably, while the proposal would strictly bar federal leaders from participating in political prediction markets, it would not entirely prohibit all forms of prediction market engagement for political staffers. For instance, betting on sporting events like March Madness would still be permissible for some, so long as wagers do not touch on government policy matters.
