In the United States, a new bill aims to end insider trading on prediction market platforms. The move follows a high-profile bet that netted one trader more than $400,000 after a major political event.
The problem centers on prediction markets, platforms where users bet on future events like elections, political decisions or world news. These markets have grown rapidly, but the rules surrounding insider trading remain unclear.
Insider trading in prediction markets rings alarm bells
According to reports, a Polymarket user bet $30,000 that Venezuelan President Nicolás Maduro would leave office by January 31, 2026. The bet was made just a day before Maduro was captured by U.S. forces. After the news broke, the user walked away with a profit of around $436,000.
According to Business Insider, New York Democratic Rep. Ritchie Torres is considering introducing legislation that would prohibit federal officials from trading in prediction markets when they possess nonpublic information obtained in the course of their official duties. The report adds that…
-Wu Blockchain (@WuBlockchain) January 5, 2026
The timing raised red flags. Critics questioned whether the trader had access to nonpublic government information.
In response, Democratic Rep. Ritchie Torres of New York introduced a new bill. This is the Public Integrity in Financial Prediction Markets Act of 2026. The bill would prohibit federal officials and personnel from trading in prediction markets when they have or could access nonpublic information in the course of their work.
More than 30 House Democrats support the bill, including former Speaker Nancy Pelosi.
How the proposed law would work
Under the proposal, elected officials, political appointees, executive branch employees, and congressional staff would not be allowed to negotiate prediction contracts tied to government action or political outcomes.
The bill defines inside information in simple terms. If a reasonable investor considers the information to be material and it is not publicly available, then trading on it would be illegal.
I always thought prediction markets would eventually face insider trading rules.
Not because of politics.
Because of the way markets behave once they start operating.Once liquidity persists, prices converge, and contracts begin to influence actual behavior, regulation becomes a… pic.twitter.com/yosq4RIgmN
– THEDEFIPLUG (@TheDeFiPlug) January 10, 2026
Prediction markets like Polymarket currently do not have strict prohibitions on insider trading. Its CEO has argued that insider trading can help reveal hidden information to the public. Polymarket declined to comment on the new bill.
In contrast, rival platform Kalshi already prohibits insider trading. Its rules prevent decision-makers from betting on the events they influence. Kalshi CEO Tarek Mansour publicly supported the bill, saying the platform already adheres to similar standards.
If you are both a member of government AND a participant in prediction markets, you have a perverse incentive to push for policies that benefit YOU personally.
This kind of forecasting and market profiteering among public servants should have no place in the federal government. pic.twitter.com/D22FKX3AFw
– Rep. Ritchie Torres (@RepRitchie) January 9, 2026
Why it matters for crypto and the markets
Prediction markets are often linked to crypto and blockchain tools. As they grow, lawmakers are paying more attention to them. The Torres bill indicates that U.S. regulators want a clear distinction between public service and personal profit.
For crypto newbies, the message is simple. Betting on the future is allowed, but using secret government knowledge to do so could soon be illegal.
Disclaimer
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