The U.S. Congress has initiated an investigation into prediction market platforms Polymarket and Kalshi over allegations of insider trading, marking a significant escalation in regulatory scrutiny. House Oversight Committee Chair James Comer (R-KY) sent formal letters to the CEOs of both companies on Friday, requesting detailed information on their internal protocols for detecting anomalous trading activity.
The probe specifically targets bets related to elections and geopolitical events, with Comer citing suspicious wagers on military actions tied to Venezuela and Iran that have already led to arrests in the U.S. and Israel. Lawmakers have demanded data on identity verification processes, geographic restrictions, and suspicious trade detection methods, with a response deadline of June 5.
In a rapid countermove, Kalshi unveiled Americans for Fair Markets (AFM), a new advocacy group designed to lobby Capitol Hill. The organization, which Kalshi describes as "well-capitalized," has recruited former White House communications staffer Taylor Budowich as a strategic advisor. AFM aims to distinguish regulated prediction platforms from offshore and unregulated betting sites, emphasizing consumer protections and market integrity.
The developments unfold amid growing tension between prediction markets and the traditional gambling industry. During recent congressional testimony, American Gaming Association President Bill Miller criticized prediction platforms as "backdoor sports-betting operations" masquerading as financial contracts. Kalshi, which holds a federal regulatory license from the CFTC, is using AFM to push back against what it calls a "gaming lobby" attempting to ban prediction markets outright, a move it warns could push users toward unregulated offshore alternatives.
