Rep. Seth Moulton just upped the ante among lawmakers racing to regulate the potential for insider trading on prediction market platforms: The Massachusetts Democrat has banned his congressional office staff from using them.
Moulton’s new office policy comes as a series of well-timed trades related to major foreign policy events — including the ouster of former Venezuelan President Nicolás Maduro and the joint U.S.-Israel strikes on Iran — have led to concern about the lack of restrictions on the wildly popular platforms such as Kalshi and Polymarket.
“Congressional staff and the Members they work for exist to serve the constituents of the districts they represent, not to profit off of the very policy decisions and world events that we are here to respond to,” Moulton said Wednesday in a post announcing the ban.
Though both Kalshi and Polymarket recently announced new insider trading restrictions on their platforms, lawmakers have said those rules aren’t strict enough to prevent federally elected officials from using their access to classified information to net major payouts.
Prediction market platforms work by allowing users to buy shares that correlate to the probability of a future event occurring. Bets can be linked to crypto wallets, and on some major platforms, including Polymarket, users can remain anonymous. That makes the payouts and the identities of those who placed them hard to trace.
After an anonymous Polymarket user became nearly $500,000 richer by placing a lofty bet on Maduro’s ouster hours before it happened, Moulton joined Rep. Ritchie Torres, D-N.Y., in introducing legislation that aims to ban federally elected officials from placing bets on prediction markets.
That bill would also prevent political appointees and executive employees from wagering on the markets. A cascade of similar legislative proposals has followed.
Rep. Jamie Raskin, D-Md., and Sen. Jeff Merkley, D-Ore., introduced a bicameral bill Thursday that seeks to ban the platforms from offering betting contracts on elections, government actions and sports — another point of contention.
Polymarket and Kalshi have been locked in legal battles with states that allege the platforms violate their sports betting laws by allowing users to wager on sporting events. The Commodity Futures Trading Commission, however, has sided with the markets.
CFTC Chair Michael Selig has argued the markets are federally regulated and are thus not subject to state gambling laws.
The markets have also raised ethical concerns. Kalshi became mired in controversy after it refused to pay out $54 million to users who wagered on the ouster of Iranian Supreme Leader Ali Khamenei before March 1. Kalshi froze the market for all users who bought shares, citing what’s known as a “death carveout” — a rule preventing transactions “directly tied to death.”
Senate Democrats called for clear guidance and strict regulation from the CFTC on markets that could “incentivize physical injury or death” in a letter that sounded the alarm on online betting on potentially deadly scenarios, such as U.S. military activities.
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