US Lawmakers Seek to Ban Insider Trading in Prediction Markets
A new law restricting interactions between government officials and prediction markets has gained support from over 30 Democrats in the US House of Representatives, including former Speaker Nancy Pelosi. The proposed legislation, known as the Public Integrity in Financial Prediction Markets Act of 2026, aims to prevent government officials from trading on non-public information.
The bill was introduced by New York Representative Ritchie Torres, who cited a controversial Polymarket bet as the catalyst for the new restrictions. The bet, which started with a $32,000 wager and eventually ballooned to over $400,000, was placed on the ousting of Venezuelan President Nicolás Maduro. The contract paid out with returns of over 1,200% after Maduro’s unexpected imprisonment, raising concerns about potential insider trading.
Lawmakers Want to Close Insider Trading Loopholes in Prediction Markets
Under the proposed legislation, federal elected officials, political appointees, executive branch employees, and congressional staff would be prohibited from purchasing, selling, or trading prediction market contracts tied to government policies, actions, or political outcomes. The bill aims to extend existing insider trading standards to prediction markets, which currently operate in a fragmented regulatory environment.
Torres explained that the convergence of government activities and prediction markets poses a clear threat to public integrity. “The blurred line between forecasts and earnings not only corrupts markets; it corrupts the government itself,” he said. The legislation is co-sponsored by a broad coalition of House Democrats, including Pelosi, Rashida Tlaib, Brad Sherman, and Seth Moulton.
Prediction Markets Expand Rapidly as US Policy Shifts
Prediction markets have grown rapidly, with combined trading volume on major platforms exceeding $44 billion in 2025. Political events, particularly elections and geopolitical flashpoints, are among the most heavily traded markets. The move to restrict insider trading in prediction markets comes as the US policy landscape continues to evolve, with a series of court rulings paving the way for greater permissiveness.
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