Democrats are advocating for the reduction of potential insider trading in the prediction markets
More than 40 Democratic lawmakers have pressed U.S. regulators to intervene as the misuse of sensitive government information in speculative markets escalates.
Summary
- More than 40 Democratic lawmakers have urged US regulators to issue guidelines that prevent government employees from using non-public information in stock markets.
- Lawmakers have flagged many suspicious transactions related to national and political events, raising concerns about insider work and national security risks.
In a letter sent to the Commodity Futures Trading Commission and the Office of Government Ethics, the group referred to “numerous incidents”, in their opinion, that have fueled speculation that government officials may have used non-public information to carry out commercial activities.
Lawmakers urged both agencies to act quickly, writing that they should “submit broad executive branch guidance” to make it clear that government officials are prohibited from engaging in insider trading on these platforms.
Examples cited in the book include betting related to the reported shooting of Nicolás Maduro and betting during Caroline Leavitt’s press conference.
Lawmakers have also flagged more serious cases involving commercial activity linked to events such as tensions involving Iran and speculation about the fate of Kristi Noem, warning that such behavior could raise national security concerns.
“Recently, it has been reported that a number of users are making suspicious trades in connection with the attack on Iran and the death of Ayatollah Khamenei,” the letter said, pointing to fears that market activity may, at times, reflect or encourage real-world events.
Administrators have been asked to provide a formal briefing on April 13, as well as details on whether there is an ongoing investigation into the organization’s employees and what plans are in place to address that behavior.
In addition, lawmakers noted that the CFTC already considers event contracts to be derivatives, subjecting them to existing financial regulations. As a result, it brings them within the scope of the STOCK Act, a 2012 law signed by Barack Obama that prohibits government officials from using sensitive non-public information for personal gain.
“The CFTC has determined that event contracts are derivatives that depend on the occurrence or non-occurrence of an event,” the lawmakers wrote, adding that the ban on insider trading should apply equally to futures markets.
This concern comes at a time when platforms like Polymarket and Kalshi have seen a surge in popularity.
However, pressure on regulators is building alongside a broader crackdown on speculative markets, where lawmakers are questioning not only the ethics of trading but also the legality of contracts tied to real-world harm.
As previously reported by crypto.news, the Senate bill entitled “IDATH BTS Act” was introduced earlier this month, seeking to prohibit event contracts related to war, assassination, and human death, which could further strengthen the scope of permissible donations on all such platforms.
