More than 40 Democratic senators and members of the House of Representatives serving in the US Congress sent a letter to federal regulators and ethics agencies asking for a clear warning to public officials that it is illegal for government officials to trade using confidential information they have on prediction market companies, especially platforms such as Polymarket and Kalshi.
Suspicious transactions and legal framework debate
Many names, including Elizabeth Warren, the leader of the Senate Banking Committee, and Cory Booker, the head of the Senate Agriculture Committee, asked for federal employees to be reminded of the prohibitions in this direction throughout the institution, in a joint text addressed to the Chairman of the US Commodity Futures Trading Commission (CFTC) Mike Selig and the managers of the US Office of Government Ethics (OGE). The letter emphasized that “federal employees are prohibited by law from trading in prediction markets using government information they have.”
The demand was brought to the agenda due to suspicions that people in a position to predict the outcome of events were trading in some prediction market contracts opened recently regarding government or military developments. In the US, derivative markets regulation clearly prohibits government employees from taking positions with confidential information obtained from their jobs. It was argued that since the CFTC considers contracts offered on these platforms to be regulated derivatives, the same prohibition should apply.
“We ask the CFTC and OGE to clearly reiterate that federal personnel are legally prohibited from profiting in the prediction markets on non-public government information in their possession,” the letter said.
The transactions in question include contracts regarding military actions against Venezuela and Iran, the speaking time of then-US President Donald Trump’s press secretary, and the dismissal of former Homeland Security Secretary Kristi Noem.
Congress and regulation agenda
It was stated that Angie Craig, chair of the Agriculture Committee in the House of Representatives, and Maxine Waters, chair of the Financial Services Committee, also signed the letter. Both committees are recognized for their direct oversight authority over the CFTC. In this respect, while the right to audit within the congress is emphasized, the expectation for the transparent operation of the institution increases.
CFTC Chairman Mike Selig is currently working on a new regulatory package regarding contracts in prediction markets. The field of activity of prediction market companies also attracts attention with its proximity to cryptocurrencies; Many lawmakers in the letter are also actively involved in the preparation of the Digital Asset Market Clarity Act, which is currently pending in the Senate.
In another news article on the same day, it was stated that federal prosecutors contacted some prediction market companies and investigated whether certain examples could be considered within the scope of insider transactions.
