More than 40 Democrats in the U.S. Senate and House of Representatives have sent a letter to a federal regulator and ethics officials asking them to warn government officials that insider trading in derivatives is illegal and that the bets they make on prediction markets, like Polymarket and Kalshi, fall into that category.
Top Democrats on the Senate Banking Committee (Sen. Elizabeth Warren) and the Senate Agriculture Committee (Cory Booker) joined dozens of their colleagues in calling on Chairman Mike Selig, head of the Commodity Futures Trading Commission, and leaders of the U.S. Office of Government Ethics to “issue executive-wide guidance explaining that federal employees must refrain from insider trading in prediction markets.”
This request was prompted by the emergence of suspicious reports that recent contracts involving government or military actions appeared to attract bets from people with special knowledge of the outcomes, leading many to believe that government officials – or people associated with them – might have made such bets. U.S. derivatives laws state that it is illegal for public officials to transact based on nonpublic information obtained in the course of their work. Since the CFTC has declared contracts with these companies to be regulated derivatives, the ban should apply, the lawmakers argued.
“We request that the CFTC and OGE issue guidance reminding federal employees of their current legal obligation to refrain from using their privileged government information to profit from predictive market trading,” the letter dated March 29 states.
Instances of potential insider trading outlined in the letter included deals on military actions in Venezuela and Iran, the length of a speech by President Donald Trump’s press secretary and the firing of former Department of Homeland Security Secretary Kristi Noem.
The letter was also signed by top Democrats on the House Agriculture Committee, Rep. Angie Craig, and the House Financial Services Committee, Rep. Maxine Waters. The agriculture panels in both houses are the ones that directly oversee the CFTC.
Selig’s CFTC has been working on a new set of policies to govern prediction markets. These companies are closely tied to the crypto industry, which is currently the focus of many lawmakers in this letter, who are also working on the Digital Asset Market Clarity Act that has been held up in the Senate.
Also Monday, news emerged that federal prosecutors have been talking with prediction market companies about whether certain cases could trigger insider trading cases.
