More than 40 Democratic members of the U.S. Senate and House of Representatives have sent a formal letter to federal regulators and ethics officials, urging them to issue explicit warnings to government employees that insider trading on prediction market platforms is illegal. The letter, dated March 29, was addressed to Commodity Futures Trading Commission (CFTC) Chairman Mike Selig and the leaders of the U.S. Office of Government Ethics (OGE).
The lawmakers, including high-ranking Democrats such as Senator Elizabeth Warren (Senate Banking Committee) and Senator Cory Booker (Senate Agriculture Committee), requested the agencies to "circulate executive branch-wide guidance explaining that federal employees must refrain from insider trading in prediction markets." They argued that since the CFTC has declared contracts on platforms like Polymarket and Kalshi to be regulated derivatives, existing laws prohibiting government officials from trading on non-public information obtained through their jobs should apply.
The request was prompted by a surge in suspicious activity reports. The letter cites specific examples where event contracts related to sensitive government actions appeared to attract bets from individuals with potential insider knowledge. These included contracts on military actions in Venezuela and Iran, the duration of a speech by former President Donald Trump's press secretary, and the firing of former Department of Homeland Security Secretary Kristi Noem.
The signatories contend that these patterns suggest government officials or their associates may be placing bets based on confidential information. The letter states, "We ask that the CFTC and OGE issue guidance reminding federal employees of their existing legal obligation to refrain from using their insider governmental information to profit from prediction market trades."
Other notable signatories include Representative Angie Craig, top Democrat on the House Agriculture Committee, and Representative Maxine Waters, top Democrat on the House Financial Services Committee. The agriculture committees in Congress have direct oversight authority over the CFTC.
This regulatory push coincides with the CFTC's ongoing work to develop a new policy framework for prediction markets. The letter also highlights the connection between these markets and the broader cryptocurrency industry, noting that many of the same lawmakers are involved in crafting the stalled Digital Asset Market Clarity Act in the Senate.
In a related development, news emerged on Monday that federal prosecutors have reportedly begun speaking to prediction market firms to investigate whether certain instances could lead to insider-trading cases.
