Prevent Insider Trading! 30 U.S. lawmakers push for new legislation to ban officials from participating in political prediction markets

Polymarket Bets on Venezuelan Coup Event Spark Insider Trading Controversy; U.S. Congress Pushes for Legislation to Ban Government Officials from Participating in Political Prediction Markets.

Venezuelan Coup Betting Sparks Suspicion; $400,000 Profit Becomes Catalyst for Legislation

Recently, the global prediction market has heated up sharply due to geopolitical fluctuations, but it has also sparked significant ethical controversy over “insider trading.”

The turning point was a precise trade on the decentralized prediction platform Polymarket. A mysterious user placed a $32,000 bet a few days before the U.S. military took action and arrested former Venezuelan President Nicolás Maduro, predicting that Maduro would exit before January 31.

As Maduro was detained by U.S. forces on charges of protection by Venezuelan law enforcement and drug trafficking, the user ultimately gained over $400,000 in profit. This highly accurate “political prophet” event immediately caused a stir in Washington, with public opinion questioning whether the user had prior access to classified military intelligence and was arbitraging in the prediction market.

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Torres and Pelosi Lead the Charge to Restrict Government Insider Participation

Faced with the risk that prediction markets could become a “cash machine” for Washington officials, New York State Assemblyman Ritchie Torres, along with former House Speaker Nancy Pelosi and 30 other Democratic lawmakers, formally introduced the “Public Integrity in Financial Prediction Markets Act of 2026” last Friday (1/9).

The bill aims to prohibit federally elected officials, political appointees, executive branch employees, and congressional staff from participating in prediction market transactions related to government policies, actions, or political outcomes.

The core of the bill is to prevent insiders with “Material Nonpublic Information” from exploiting their positions to gain improper benefits in situations of information asymmetry. This principle is aligned with existing securities law insider trading regulations.

Conflicts of Interest and Policy Manipulation; Lawmakers Worry Officials Could Profit from Result Manipulation

Representative Torres explicitly stated that the intersection of prediction markets and the federal government might be “Washington’s most corrupt corner,” where insider trading and self-dealing are no longer just imagined risks but actual dangers.

He explained that if members of the Trump administration bet on events like “Maduro being expelled,” it could create a distorted incentive mechanism, encouraging officials to push policies that favor their own financial interests.

Senator Chris Murphy also publicly criticized this phenomenon and shared a clip of a prediction market during a White House press conference as an example, emphasizing that when those in power can profit by changing outcomes, the situation becomes extremely chaotic.

Murphy pointed out that government transparency and integrity should not be eroded by market-driven interests and that clear ethical boundaries must be established.

Debate Over Market Efficiency and Public Integrity; Bill’s Future Movement Under Scrutiny

Although lawmakers are firm in their stance, reactions within the prediction market industry vary. Tarek Mansour, CEO of compliant platform Kalshi, expressed support for the bill, noting that his platform already enforces strict rules against insider trading.

However, some industry insiders, such as Loxley Fernandes, CEO of Dastan, believe that from an academic perspective, insider participation can actually improve information transmission efficiency and market accuracy, and prediction markets should not be simply equated with traditional gambling.

Currently, the bill has garnered support from prominent Democrats like Brad Sherman and Rashida Tlaib and is seeking bipartisan approval.

Meanwhile, the U.S. Senate is also expected to review broader legislation on digital assets and cryptocurrency markets, such as the “Responsible Financial Innovation Act” (RFIA), next week. Washington’s regulatory stance on the digital asset industry is at an unprecedented turning point.