Senate Bill Introduced to Ban Federal Elected Officials From Prediction Markets

• Two Senators introduced a bill to ban federal elected officials from engaging in prediction markets
• The “End Prediction Market Corruption Act” will ban the President, Vice President, members of Congress, and other officials from trading event contracts
• The bill sets specific penalties for officials engaging in prediction markets

Two U.S. Senators have introduced a bill to prohibit top-elected federal officials from engaging in prediction markets in effort to crack down on the potential for insider trading.

Senators Amy Klobuchar (D-MN) and Jeff Merkley (D-OR) introduced the “End Prediction Market Corruption Act,” a bill to ban the President, Vice President, members of Congress, and other top-federal election official from trading event contracts.

The introduced bill comes in the wake of large payouts from prediction markets stemming from U.S. strikes on Iran and Venezuela military actions.

Preventing Insider Trading

Merkley and Klobuchar’s bill is co-sponsored by Senators Chris Van Hollen (D-MD), Adam Schiff (D-CA), and Kirsten Gillibrand (D-NY).

“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,” Merkley said in a released statement. “Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.”

The bill sponsors pointed to several recent large payouts through prediction market contracts stemming from U.S. military action. According to the Wall Street Journal, a mystery trader profited $400,000 on Polymarket betting on Venezuela President Nicolás Maduro’s ousting just several hours before the U.S. took action against the country.

Additionally, NPR reported a user named “Magamyman” profited $553,000 placing bets on Polymarket regarding Iran’s Supreme Leader, Ayatolla Ali Khamenei, hours before an Israeli air strike killed him last week.

The trades drew criticism, with members of Congress decrying potential insider trading on the platforms.

Attorney General Can Take Action

If an elected official is found participating in prediction markets, the bill sets a civil penalty of $10,000 per violation. Additionally, the Attorney General “may bring a civil action in the appropriate United Stated district court against any individual who engages” in the markets.

“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,” Klobluchar said.

The bill has yet to be assigned to a committee.