More than 40 Democratic lawmakers serving in the U.S. Congress have called on federal regulators and ethics agencies to issue a clear public warning to government employees, reminding them that it is illegal to trade on prediction market platforms—such as Polymarket and Kalshi—using confidential information acquired through their official duties. In a joint letter, they requested that federal personnel be reminded of the legal prohibitions against leveraging insider knowledge in these emerging markets.
Suspicions around trades and legal boundaries
Senator Elizabeth Warren, who leads the Senate Banking Committee, along with Cory Booker, head of the Senate Agriculture Committee, were among the prominent lawmakers to sign the letter addressed to Commodity Futures Trading Commission (CFTC) Chair Mike Selig and leaders of the U.S. Office of Government Ethics (OGE). The correspondence urged a robust reiteration throughout federal agencies that trading based on privileged government information is against the law. The lawmakers emphasized in their letter the legal restrictions placed on federal staff who might be tempted to take advantage of their inside access through prediction markets.
This warning follows growing speculation about certain trades on prediction markets tied to government or military developments. In recent months, contracts were launched regarding outcomes on issues like possible military action involving Venezuela and Iran, the speaking time of then-White House press secretaries, and the possible removal of former Secretary of Homeland Security Kristi Noem. As these contracts enable the placement of bets on real-world events—often influenced or known only to insiders—the question of illicit use of privileged information by government employees has attracted renewed attention.
“We are requesting that the CFTC and OGE clearly remind federal personnel that profiting from undisclosed government information in prediction markets is explicitly forbidden by law,” the letter stated.
Under current U.S. derivatives regulation, government employees are prohibited from making trades based on sensitive information gained through their positions. With the CFTC having classified prediction market contracts as regulated derivative products, lawmakers argue that these insider trading bans should apply everywhere across prediction market platforms as well. Suspicious activity, particularly involving high-stakes political or security events, has only sharpened calls for clear boundaries and enforcement.
Congressional oversight and regulatory priorities
The letter was also signed by House Agriculture Committee Chair Angie Craig and Financial Services Committee Chair Maxine Waters. Both committees are recognized for their direct oversight of the CFTC, underlining Congress’s role in holding federal agencies accountable. Their signatures highlight intensifying expectations within the legislative branch for transparency and effective governance of prediction markets.
Meanwhile, CFTC Chair Mike Selig is in the process of developing a new set of regulatory proposals aimed at better supervising prediction market contracts. These platform operators tend to work closely with cryptocurrencies, representing a significant intersection between digital assets and traditional finance. Notably, many lawmakers involved in the letter are also key contributors to the pending Digital Asset Market Clarity Act in the Senate, further demonstrating the political momentum behind updating regulatory frameworks in light of rapidly-evolving technology.
In related news, federal prosecutors are reportedly reaching out to various prediction market firms to investigate whether particular instances might qualify as illegal insider trading. Authorities are said to be looking into whether certain unusual contracts or transactions stemmed from nonpublic information available only to a select group close to U.S. government operations.
