Democrats urge CFTC crackdown on insider trading in prediction markets

More than 40 U.S. Democratic lawmakers have urged the CFTC and the Office of Government Ethics to act over “potential insider trading” in prediction markets. They asked for executive-branch-wide guidance barring federal employees from trading on material nonpublic government information. The letter points to allegedly suspicious trades tied to geopolitics and politics, including bets connected to the reported capture of Nicolás Maduro, wagers on how long a press briefing by Karoline Leavitt would last, and trades linked to rising Iran tensions and speculation around Kristi Noem. Lawmakers also cited examples involving trades around the invasion of Iran and the death of Ayatollah Khamenei. Regulators were asked to brief lawmakers by April 13, including whether investigations involving federal employees are underway and what detection and prevention systems exist. The lawmakers argue the STOCK Act (2012) should cover prediction markets because the CFTC treats event contracts as regulated derivatives, meaning insider trading rules should apply to these platforms as well—raising the prospect of tighter compliance and enforcement around insider trading in prediction markets. With Polymarket and Kalshi growing in popularity, traders should expect heightened scrutiny that could affect liquidity and sentiment. A separate newly introduced Senate bill, the “DEATH BETS Act,” would further restrict event contracts linked to war, assassination, and individual death.