United States of America

Democrat Introduces Bill Targeting Insider Trading in Prediction Markets

Does insider trading improve prediction market accuracy, or does it undermine credibility and create financial risks?

JAN 6·Updated JAN 7

Democrat Introduces Bill Targeting Insider Trading in Prediction Markets

Story

Above: U.S. Rep. Ritchie Torres during an interview Jan. 28, 2025. Image credit: Victor J. Blue/Bloomberg/Getty Images

The Facts

U.S. Rep. Ritchie Torres (D-NY) is introducing the Public Integrity in Financial Prediction Markets Act of 2026, which would prohibit federal officials from trading on prediction market contracts tied to political outcomes or government policy when they possess nonpublic information.
Axios
Forbes
AInvest
This proposed legislation follows a Polymarket trade in which a user placed approximately $32,000 on Venezuelan President Nicolás Maduro's removal from power within 24 hours before U.S. forces captured him, netting over $400,000 in profit. Insider trading is illegal in the stock market, whereas prediction markets are subject to far fewer regulations.
The Block
Forbes
AInvest
Reuters
The Wall Street Journal
The bill would apply to federal elected officials, political appointees and executive branch employees, barring them from trading when they possess or may reasonably obtain material nonpublic information through their official duties.
CasinoBeats
SBC Americas
Forbes
Polymarket currently lacks formal restrictions against insider trading, while Kalshi already prohibits trading on material nonpublic information by insiders or decision-makers under its platform rules.
The Block
Axios
AInvest
The legislation is modeled after the STOCK Act, which bars insider trading by government officials in traditional financial markets, and would extend similar standards to the prediction market sector.
CasinoBeats
Gambling News
AInvest

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The Spin

Narrative A

Insider trading in prediction markets could actually make forecasts more accurate. When people with real knowledge trade on events, including geopolitical developments, they provide better signals that help everyone understand what's likely to happen. The whole point of prediction markets is surfacing the best information by paying traders to be right, not creating a perfectly level playing field.

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Covers

Narrative B

Prediction markets face serious ethical problems from insider manipulation, threatening their credibility and creating financial risks. Platforms have seen unauthorized data edits to resolve bets and wash trading comprising up to 60% of volume. Without proper safeguards against material nonpublic information, these markets encourage impulsive wagers that could increase loan defaults and pressure credit quality.