Republican Rep. Bryan Steil introduced legislation to ban members of Congress from trading on prediction markets like Kalshi and Polymarket, where bettors wager on election outcomes and other future events.
The bill targets a growing loophole in federal ethics rules. Current law prohibits lawmakers from trading individual stocks based on nonpublic information gained through their official positions. Prediction markets operate in a gray area. These platforms let users bet on elections, policy decisions, and other events, creating potential conflicts when lawmakers with inside knowledge participate.
Steil's proposal comes as prediction markets have exploded in popularity and regulatory visibility. Kalshi and Polymarket have attracted millions of users and billions in trading volume, particularly around major elections. The scrutiny reflects concerns that members of Congress could profit from bets on outcomes they influence directly.
The ethics implications run deep. A lawmaker could theoretically bet against a policy their party supports, then shift their vote based on financial incentive rather than constituent interest. Alternatively, they could accumulate advance knowledge of legislative timing and place bets accordingly, giving them an unfair edge unavailable to ordinary traders.
Steil's bill would explicitly add prediction market contracts to the list of prohibited trading activities for federal elected officials. The restriction would mirror existing rules under the STOCK Act, which banned lawmakers from trading on material nonpublic information obtained through their jobs.
The proposal faces an uncertain path in Congress. It has bipartisan concerns about regulation, but also bipartisan recognition that ethics rules need updating as financial markets evolve. Some lawmakers argue any trading restrictions infringe on personal freedom. Others contend that public service demands a higher standard than ordinary citizens face.
For average investors, this debate signals that prediction markets will likely face tighter oversight regardless. If Congress restricts its own members' participation, regulators like the CFTC may follow with broader limitations on who