Prediction Markets Ban Urged After 1,700-Page Probe

Editor’s take (Keshav Aggarwal): Congress should ban officials from trading on Kalshi and Polymarket to stop insider trading. I see the probe as good news for ordinary users, and the committee’s praise makes me trust these platforms more because it points toward fair competition.

A prediction markets ban or narrower trading limits for government officials should be on the table, House Oversight Committee Chair James Comer said, after a committee investigation reviewed nearly 1,700 pages of documents on insider trading risk at platforms including Kalshi and Polymarket.

The committee’s Nov. 13 release said its probe examined insider trading risks involving government officials, military personnel and people holding security clearances. Comer, a Kentucky Republican, said Congress should consider legislation covering federal employees, lawmakers and congressional staff — but the recommendations leave open whether to prohibit all prediction market trading by officials or to restrict only specific contracts tied to government business.

“Congress must consider additional reforms to prevent public corruption and restore the American people’s trust in government,” Comer said.

What the prediction markets ban proposal actually says

The committee’s central recommendation is that restrictions should apply across the executive, legislative and judicial branches, on the argument that public servants should not personally profit from nonpublic information connected to their work. The memo framed the issue around appearances as much as conduct, saying the rules should remove even the perception of self-dealing.

Two paths were presented for lawmakers: a complete prohibition on officials trading prediction markets, or narrower limits on contracts connected to government decisions. The committee also called for Congress to encourage prediction market companies and federal agencies to share the information needed to enforce such restrictions.

Notably, the memo conceded that existing law already reaches the conduct. It cited the Commodity Exchange Act, as amended by the STOCK Act, which bars federal employees, members of Congress and others from trading commodity futures, options or swaps on nonpublic information drawn from their positions.

How the investigation unfolded

The committee opened its records requests on May 22, asking Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour for material on account verification, geographic restrictions and suspicious trading. The inquiry also examined whether users could bypass restrictions on offshore platforms.

By Sept. 29, the committee had sent further requests to Hyperliquid Labs, Crypto.com and Aristotle Exchange, which operates PredictIt. At that stage it reported receiving nearly 1,000 documents and five briefings from Kalshi and Polymarket representatives.

The committee credited the platforms for much of the policing, noting that most reported insider trading incidents were first detected and flagged to regulators by the operators themselves. It singled out Polymarket’s hiring of a former law enforcement expert and its “PolyGraph” surveillance software built with Chainalysis, and Kalshi’s strengthened detection protocols.

The cases driving the scrutiny

The probe follows a series of enforcement actions that turned insider trading on event contracts from a hypothetical into a documented problem.

The CFTC credited KalshiEX with assisting the Perez investigation, and said the civil penalty included a substantial discount under its cooperation policy.

What Congress can actually do

A committee cannot impose a prediction markets ban on its own. There are three plausible routes, and the Senate has already taken the fastest one.

• Chamber rules: the Senate adopted its own prediction market ban by unanimous consent on April 30, changing its standing rules with immediate effect. The resolution, introduced by Republican Sen. Bernie Moreno, covered senators and Senate staff. Republican Rep. Ashley Hinson subsequently said she would introduce a similar measure for the House.
• Legislation: a statute could reach the executive branch and judicial officers, which internal chamber rules cannot. That route would require committee markup, floor time and almost certainly CFTC input on enforcement and market surveillance.
• Agency rulemaking and enforcement: the CFTC is already asserting authority over prediction markets in disputes with several states, and the Perez settlement shows the agency will pursue cases built on information obtained through government employment.

Polymarket has said it supports restrictions, with its terms already prohibiting the conduct. Kalshi’s Mansour said the company proactively blocks members of Congress and enforces its insider trading rules.

The volume question nobody has answered

The commercial impact is harder to size than the political one. It is unclear from the committee’s release what share of either platform’s volume comes from political or government-linked contracts, leaving the revenue effect of a ban unclear.

The practical damage may run less through the number of officials trading than through the pricing function those markets serve. Political-event contracts derive their usefulness from being a public, real-time probability estimate; a steady drip of insider trading cases undermines that, regardless of how few traders are involved.

Broader crypto risk appetite is already weak. Data from CoinPaprika shows the total crypto market cap at $2.39 trillion, down 2.52% over 24 hours, with Bitcoin at $67,337 — down 2.33% on the day and 17.46% over 30 days. The Alternative.me Crypto Fear & Greed Index sits at 13, or Extreme Fear, down from 20 a day earlier. Prediction markets have traded as a growth story largely insulated from spot crypto performance, but a regulatory overhang in Washington is one variable that correlation does not hedge.

What to watch next

Three signals matter. First, whether Hinson follows through with a House rule resolution and how quickly it moves, given the Senate version passed by unanimous consent. Second, whether the committee’s memo converts into a markup — a bill with defined contract categories would be far more consequential than a staff recommendation. Third, the CFTC’s posture: the agency has to weigh tighter official-trading limits against its own push for jurisdiction over prediction markets nationally.

Also watch Sen. Elizabeth Warren, who is set to take over as Senate Banking chair and has signaled interest in the sector. And watch the courts, where Van Dyke has pleaded not guilty.

Correction risk runs in one direction for the industry — each new case makes voluntary platform controls a harder sell as a substitute for statute.

Frequently asked questions

Did the House Oversight Committee actually ban prediction market trading by officials?

No. The committee's Nov. 13 release presents options for Congress to consider, including a complete prohibition or narrower limits on government-related contracts. A committee cannot impose such a ban itself; it requires chamber rules, legislation or agency action.

Is insider trading on prediction markets already illegal?

The committee's memo said existing law already applies, citing the Commodity Exchange Act as amended by the STOCK Act, which bars federal employees, members of Congress and others from trading commodity futures, options or swaps on nonpublic information drawn from their positions.

Which platforms were part of the investigation?

The committee sent records requests to Polymarket and Kalshi on May 22, and later to Hyperliquid Labs, Crypto.com and Aristotle Exchange, which operates PredictIt. By Sept. 29 it reported receiving nearly 1,000 documents and five briefings from Kalshi and Polymarket representatives.

Sources: crypto.news, Decrypt