A Democratic Congressman believes that federal legislation is needed to ensure that politicians are not engaging in insider trading on prediction market platforms.
New York Rep. Ritchie Torres is preparing to introduce the Public Integrity in Financial Prediction Markets Act in Washington, D.C., his office confirmed to SBC Americas on Monday. Torres’ bill will be formally introduced this week.
The bill’s language, viewed by SBC Americas, would ban federal elected officials, political appointees and executive branch employees from trading on prediction market contracts related to any government policy, government action or political outcome when the individual possesses or has the reasonable means to obtain relevant material nonpublic information via their official duties.
Bill comes amid Polymarket Maduro furor
The impending legislative push comes amid scrutiny over potential insider trading related to Venezuelan President Nicolás Maduro.
Trading on Polymarket’s global site on whether Maduro would still be in his position by the end of January spiked shortly before President Donald Trump announced his capture on Saturday. A recently created Polymarket account won more than $400,000 on around $30,000 worth of trading on the market.
While it has not been confirmed that the trading was done using insider knowledge, the timing of the incident raised eyebrows and questions. It was just hours after the news of the Polymarket activity that Sherman broke the news of the apparently planned federal bill.
Congress cites concerns at reauthorization hearing
Since a court ruling allowed Kalshi to offer event contracts on the November 2024 U.S. elections, the prediction markets space has expanded considerably, most notably deep into sports. A range of prediction market platforms, including several operated by or in association with online gaming companies, now offer event contracts trading on topics including sports, politics and popular culture.
Meanwhile, politicians have begun the early stages of discussing a reauthorization process for the federal derivatives regulator, the Commodity Futures Trading Commission (CFTC). There is no set date to reauthorize the CFTC, but it is standard practice for Congress to re-evaluate agencies’ operations and oversight and subsequently reauthorize the entity.
Reauthorization requires a federal bill and could serve as an opportunity to incorporate new rules such as the one Torres is proposing. During the first informational meeting regarding reauthorization, Rep. Gabe Vasquez of New Mexico floated the idea of redefining the scope of what CFTC-regulated entities can offer.
New York legislators move to address predictions
While there has not yet been a significant federal legislative movement to curb prediction markets, Torres is not the only New York lawmaker who has made an effort.
State Assemblymember Clyde Vanel’s A925 would amend Empire State law to ban prediction market platforms from offering markets on “catastrophic events, politics, deaths, securities and athletic events.” It would also impose firm rules on prediction market platforms in New York, including an age limit of 21, implementing self-exclusion mechanisms and self-imposed limits such as deposits and spending and a ban on using credit-based payments like credit cards.
Vanel’s bill would also prohibit providers from offering prediction markets in New York if the market includes, as either a liquidity provider or a market maker, any entity that knowingly engages in gaming either inside or outside the state. The Oversight and Regulation of Activity for Contracts Linked to Events Act (ORACLE Act) was referred to a New York Assembly committee in November.
