️ Two Democratic US Senators, Jeff Merkley of Oregon and Amy Klobuchar of Minnesota, are preparing to introduce legislation that would prohibit members of Congress, the president, and vice president from trading event contracts on prediction market platforms such as Kalshi and Polymarket. The bill, if passed, would also restrict other executive branch officials from profiting on these platforms, imposing fines of at least $10,000 for each violation.

️ The legislation further mandates that violators must repay any profits gained from trades. This initiative comes as prediction markets face scrutiny following incidents where anonymous bettors allegedly profited from positions related to US military actions. For instance, bets were placed on Polymarket—a platform allowing anonymous trading—within 24 hours of a US strike on Iran, raising concerns about potential insider information.

️ Only weeks earlier, another user reportedly made over $400,000 on Polymarket by betting on the removal of Venezuelan President Nicolas Maduro from office, just hours before the US's alleged abduction of Maduro. In a statement, Senator Klobuchar purportedly claimed, "At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct. This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain."

️ Senator Merkley is claimed to have stated, "When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits." Prediction markets enable users to wager on future events, ranging from election outcomes and monetary policy decisions to sports games and military strikes, highlighting their potential for misuse by those with privileged access.

️ The two major platforms in this sector are Kalshi and Polymarket. Kalshi is the only fully regulated exchange in the US, while Polymarket was banned in the US for three years in 2022. It re-entered the US market for traders late last year but is currently only cleared for sports betting. Although US users are officially barred from other wagers, a CoinDesk investigation found that Americans have been accessing the platform via VPNs, underscoring regulatory challenges.

️ A Kalshi spokesperson stated, "We support Congress and regulators taking action to police insider trading, and keep prediction markets onshore and under federal regulation. In the past few months, we’ve had outreach from policymakers from both sides of the aisle about work they’re doing to ensure market integrity, and we’re in talks with many of them, including Senator Merkley." Polymarket did not respond to Al Jazeera's request for comment, reflecting the industry's divided stance on regulation.

️ The bill emerges amid growing political pressure on the prediction market sector. Democratic Senator Chris Murphy of Connecticut is also reportedly working on legislation to curb the industry, including measures to ban trades based on government actions. Simultaneously, a new conservative coalition led by former White House Office of Management and Budget director Mick Mulvaney is advocating for the industry to be regulated more similarly to sports betting, suggesting ongoing friction over the appropriate regulatory framework.

Source: www.aljazeera.com