- Rep. Ritchie Torres introduced legislation banning federal officials from trading prediction markets.
- The bill targets trades on platforms like Polymarket related to government policy and political outcomes.
- Officials with material nonpublic information would face criminal penalties for prediction market trades.
Politicians on Polymarket?
Democrat Rep. Ritchie Torres from New York introduced legislation on Monday that would prohibit US federal officials from trading prediction market contracts relating to government policy, government actions, or political outcomes.
Dubbed the Public Integrity in Financial Prediction Markets Act, the bill would make it unlawful for elected officials, political appointees, and federal employees to trade these contracts if they could obtain such information through their official duties.
Torres’s bill comes just as allegations of rampant insider trading on popular betting platform Polymarket surfaced.
The alarm went off when an account on Polymarket bet $30,000 that Venezuelan leader Nicolás Maduro would be ousted by January 31, 2026. Less than 24 hours later, the US took Maduro into custody, and the trader pocketed $400,000.
Prediction markets broke onto the scene in 2024, just as the US presidential campaign was underway. Traders flocked to Polymarket and Kalshi, among others, to wager whether Republican Donald Trump or Democrat Kamala Harris would win the election.
Polymarket, in fact, is partially owned by Donald Trump Jr., who sits on the advisory board. Users fired shots at the platform yesterday when it refused to pay out bettors who had wagered that the US had invaded Venezuela.
But these platforms are ripe for the picking by bettors with informational advantages. Consider Federal officials with inside knowledge about policy decisions, legislative outcomes, or political developments could eventually profit by betting on Polymarket before any information becomes public.
Torres’s bill would criminalize such trades, treating them like insider trading in traditional securities markets.
Regulating regulators
If passed, any government official in Washington D.C. or the public US state apparatus would be subject to the bill.
That includes members of Congress, White House staff, cabinet secretaries, federal regulators, and even career bureaucrats.
The ban applies when officials either possess material nonpublic information relevant to the trade or could reasonably obtain such information through their official duties.
What does material nonpublic information mean? It’s data that an investor would consider important but that isn’t publicly available. This sort of protection is standard in traditional securities law for insider trading cases.
Critically, the prohibition extends beyond officials who currently possess inside information to those who could reasonably obtain it through their work, even if the information wouldn’t be available to a diligent member of the public.
The bill doesn’t specify penalties for violations or which agency would enforce the prohibition.
Pedro Solimano is DL News’ Buenos Aires-based markets correspondent. Got a tip? Email him atpsolimano@dlnews.com.