Key Points
- New legislation would prohibit federal lawmakers, the president, and top officials from wagering on prediction platforms
- Penalties include a 10% penalty plus complete forfeiture of profits to federal coffers
- Legislation comes after questionable wagers on Iran military action generated over $1 million in profits
- Kalshi has endorsed the proposed legislation; Polymarket remains silent
- Both companies revised their internal policies Monday before the bill’s introduction
A bipartisan coalition in Congress has unveiled legislation designed to prevent elected officials and high-ranking government personnel from participating in prediction market betting. The proposed PREDICT Act comes from Representative Nikki Budzinski, an Illinois Democrat, working alongside Representative Adrian Smith, a Nebraska Republican.
The proposed legislation specifically addresses platforms such as Polymarket and Kalshi, where participants can wager on political developments, governmental decisions, and policy implementations.
The PREDICT Act would create a comprehensive prohibition covering congressional members, both the president and vice president, along with politically appointed officials. The restriction extends beyond the officials themselves to include their spouses and minor dependents.
Violators would face financial consequences consisting of a penalty amounting to 10% of their total transaction value. Additionally, they must surrender all earnings directly to the US Treasury.
The legislative push stems from troubling patterns in betting behavior. A limited group of bettors earned more than $1 million on Polymarket by accurately predicting the exact timing of US military strikes against Iran.
In a separate incident from earlier this year, an unidentified bettor earned upwards of $400,000 by wagering that Venezuela’s Nicolas Maduro would be removed from power, placing the bet mere hours before a US-led military intervention.
Budzinski emphasized that such incidents raise serious concerns about whether individuals with privileged access to classified government intelligence are exploiting that information for financial gain through prediction markets.
Mounting Legislative Pressure
The PREDICT Act represents just one component of multiple legislative efforts aimed at regulating prediction markets that have emerged in recent weeks. Senator Chris Murphy, along with colleagues, has put forward legislation that would completely prohibit betting on terrorism-related events, military conflicts, and political assassinations. Senators Jeff Merkley and Amy Klobuchar unveiled the End Prediction Market Corruption Act during March.
This past Monday saw Senators John Curtis and Adam Schiff collaborate on yet another bipartisan measure to eliminate sports gambling and casino-type betting contracts from CFTC-registered prediction market services.
Beyond federal action, 11 state governments have initiated legal proceedings against prediction market operators, while two additional states have cases currently under review.
Industry Reaction to Proposed Regulations
Kalshi representatives indicated the company maintains existing prohibitions against insider trading by government personnel and characterized the legislation as a “welcome measure.” The platform expressed support for establishing uniform standards throughout the entire industry.
Polymarket has not issued any statement regarding the proposed legislation despite multiple requests for comment.
Both platforms implemented policy changes Monday. Kalshi announced enhanced screening procedures that prevent politicians from wagering on their own electoral contests and bar athletes from betting on competitions in which they participate. Polymarket introduced prohibitions on trades utilizing stolen or privileged information and banned participation by individuals capable of influencing event outcomes.
Budzinski confirmed her office has maintained ongoing dialogue with prediction market companies as the legislative process advances.
The PREDICT Act would delegate investigation of potential violations to the House Ethics Committee for disciplinary action. Budzinski noted that the bipartisan nature of the proposal increases its likelihood of approval in both the Republican-majority House and Senate.
The legislation maintains some flexibility for political staff members. For instance, a chief of staff could continue participating in recreational betting activities like March Madness basketball tournament brackets, but would be barred from wagering on governmental matters such as the timing of federal agency operations or policy implementations.
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