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Read Full BioRep. Ritchie Torres (D-NY) introduced new legislation on Monday that would ban federal officials from trading on prediction markets related to government policy, government action, or political outcomes. The bill would close what many on Capitol Hill view as an ethics gap in the quickly growing event-contract space.
Known as the Public Integrity in Financial Prediction Markets Act of 2026, the bill would make it illegal for a “covered individual,” defined as an elected official of the federal government, a political appointee, or an employee of an executive agency, to trade prediction market contracts if they “possess material nonpublic information” or “may reasonably obtain such material nonpublic information in the course of performing official duties.”
The measure comes amid increased scrutiny of prediction markets following a few exceptionally well-timed trades on Polymarket shortly before U.S. armed forces detained Venezuelan President Nicolás Maduro on January 3.
The trades involved accounts that were created just days before the U.S. action in Venezuela, with the wallets placing large “Yes” bets on contracts predicting Maduro would be removed from office. One of those bets netted an unidentified trader more than $400,000. After the trades on Maduro came to light, many across social media speculated that the traders had used inside information to place the bets.
Bill Focuses on Specific Prediction Markets
The proposal isn’t a blanket ban on trading on prediction markets by federal officials; instead, the ban would only apply to contracts tied to government policy, government action, or political outcomes. That means federal officials are free to trade event contracts related to sports, entertainment, or other markets, since they fall outside the bill’s government-related restrictions.
Under the legislation, “material nonpublic information” would be defined as “information that a reasonable investor would consider important in making an investment decision” and that “is not publicly available.” It defines prediction market contracts broadly as “any financial instrument, contract, or derivative listed on or offered by a platform engaged in interstate commerce; and tied to the occurrence or non-occurrence of a future event, including market-based event contracts.”
While the bill doesn’t spell out what the legal consequences would be for federal officials who violate the prohibition or how the restriction would be enforced, it does reflect a growing concern that prediction markets could allow public officials to profit from their privileged access to sensitive information in ways that have not yet been addressed by existing laws.
How the Bill Fits Into Existing Insider-Trading Laws
Torres’ Public Integrity in Financial Prediction Markets Act of 2026 seeks to apply the same insider-trading principle to prediction markets that the STOCK Act (which applies to members of Congress and their staff) applies to securities trading, namely, making it unlawful for federal officials to trade on nonpublic information obtained through their government roles.
While insider trading in traditional capital markets is already illegal and routinely prosecuted by the Department of Justice and the Securities and Exchange Commission, prediction markets occupy a more ambiguous regulatory space, particularly when it comes to contracts tied to political or government outcomes.
Current insider trading laws were drafted with traditional financial markets in mind, long before the first prediction markets began operating. As a result, there’s been a gap in how existing insider-trading laws apply, as newer products, such as event contracts, don’t fit neatly within traditional securities-law frameworks.
As the bill is written, it reflects the view that the same insider-trading principles should apply regardless of whether the underlying asset is a stock or a contract tied to geopolitical developments or government policy decisions.
Commodity Futures Trading Commission-regulated prediction platform Kalshi says the proposed legislation aligns with its current rules.
Kalshi spokesperson Elisabeth Diana told CasinoBeats, “Kalshi explicitly prohibits insider trading of any form, including government employees trading on prediction markets related to government activity.”
Diana went on to say, “We’re looking at the specifics of the bill, but we already ban the activity it cites and are in support of means to prevent this type of activity.”
CasinoBeats reached out to Polymarket for comment, but we have not received a response.
