The U.S. lawmakers introduced a bill that would ban high-ranking government officials and U.S. Congress members from betting on prediction markets. Lawmakers introduced the bill following the detection of a few incidents involving insider trading activity.
Introduced with bipartisan support from Congressmen Adrian Smith and Nikki Budzinski, the bill, formerly known as the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act (PREDICT Act), seeks to ban officials from betting on prediction markets.
According to the press release, the act would prohibit ‘members of Congress, their spouses and dependent children; the President and Vice President; and political appointees, including individuals serving in Executive Schedule positions, among others,’ from trading on the outcomes of political events, policy decisions, and other government actions on prediction markets.
“The American people are tired of politicians using their influence for personal gain, and the rise of prediction markets has made those concerns even more relevant.
In recent months, we’ve seen instances of little-known traders making massive profits on events ranging from war with Iran to how long a government shutdown will last, raising necessary questions about the use of inside information. I am excited to be working with Representative Smith to close that loophole and ensure that those with access to sensitive information cannot profit from it,” said Budzinski
In the event that someone belonging to the above-mentioned categories is caught violating the law, they would need to pay a penalty of 10% of the value of the agreement or contract and disgorge the profits they earned from the event to the US Treasury.
Analyst Lavneet Bansal stated that there are insider trading guardrails for equities, and prediction markets now need similar standards. These markets have grown quickly, but they can be more vulnerable because the information gap is wider and closer to the outcome itself.
In some cases, participants may not just have better information; they may be closer to the decisions that shape the result. As the market matures, the rules around access and fair participation need to catch up.
Analyst Lavneet Bansal
Meanwhile, an on-chain analyst discovered that there was an insider with a 100% success rate. The insider placed 4-10 bets on military events while managing 38 accounts. The suspected insider made $2.14 million betting on a U.S. strike on Iran using these 38 accounts on Polymarket.
