Two US senators have introduced new legislation aimed at preventing federal officials from trading on prediction market platforms, citing concerns that access to non-public government information could create opportunities for corruption.
The proposed End Prediction Market Corruption Act, introduced by Senators Jeff Merkley (D-Oregon) and Amy Klobuchar (D-Minnesota), would prohibit the President, Vice President, members of Congress and certain senior government officials from buying or selling event contracts tied to real-world outcomes.
The initiative reflects growing scrutiny in Washington around the rapid expansion of prediction markets, which allow users to trade contracts on political, economic and geopolitical outcomes.
What The Proposed Bill Means for Prediction Markets
Lawmakers say the legislation is designed to prevent government officials from using privileged information to gain financial advantage in event-based trading markets.
Strategic implications for the market:
- Government officials barred from event contracts: The bill would prohibit top federal officials from trading prediction market contracts.
- Expanded enforcement authority: Regulators could pursue civil penalties and enforcement actions against violations.
- Disclosure requirements strengthened: Officials would be required to disclose prediction-market transactions in financial reports.
- Integrity pressure on platforms: Prediction market operators may face greater expectations around compliance and insider-trading safeguards.
- Broader regulatory momentum: The proposal adds to increasing US political attention toward the governance of event-based trading markets.
Under the bill, violations could result in civil penalties of up to $10,000 per violation or the total profit earned, whichever is greater.
Concerns Over Insider Information and Market Integrity
Supporters of the bill argue that prediction markets create a potential conflict of interest when government officials have access to sensitive or classified information that could influence the outcome of events being traded.
Senator Merkley said the proposal is intended to safeguard public trust in government decision-making. Merkley said
When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits. Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.
Senator Klobuchar added that the legislation would strengthen oversight mechanisms by enhancing regulatory powers under the Commodity Futures Trading Commission (CFTC), which oversees event contract markets in the United States. Klobuchar said
At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct. This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain.
The legislation also requires enhanced disclosure in financial reporting to ensure transparency around event contract transactions made by public officials and their families.
Prediction Markets Face Growing Policy Scrutiny in the US
The proposal arrives as prediction market platforms such as Kalshi and Polymarket continue to attract attention from policymakers and regulators.
Recent controversy surrounding markets tied to geopolitical events and political outcomes has intensified debate in Washington about the ethical and regulatory implications of these platforms. Some lawmakers have argued that trading on sensitive events such as war or government actions raises concerns about conflicts of interest and market manipulation.
At the same time, several regulatory discussions across the United States are examining how prediction markets intersect with existing gambling and financial trading frameworks. Policymakers are increasingly assessing whether these platforms should be regulated more closely as financial derivatives or treated as wagering products.
That debate is also reflected in broader policy initiatives across individual states. In Connecticut, for example, lawmakers have proposed introducing a minimum age requirement of 21 for prediction markets and related gambling access, reflecting growing attention to consumer protections and market oversight.
A Broader Debate Over Event Contract Markets
The proposed legislation is unlikely to immediately reshape the prediction market industry, particularly given the political divisions in Congress and the evolving regulatory approach toward these platforms. However, the bill signals that federal policymakers are increasingly examining the governance of event-based trading markets.
Prediction markets have experienced significant growth in recent years as new technology platforms have enabled retail traders to speculate on a wide range of real-world outcomes, from economic indicators to election results.
As these markets expand, regulators and policymakers are expected to continue evaluating how they intersect with financial regulation, political ethics rules and gambling laws. The debate has already intensified following disputes over the use of sports leagues and public event branding in prediction markets, raising broader questions about how the sector should be governed as it grows.