A new bill in the United States is aiming to stop insider trading on prediction market platforms. The move follows a high-profile bet that earned one trader more than $400,000 after a major political event.
The issue centers on prediction markets, platforms where users place bets on future events like elections, policy decisions, or global news. These markets have grown fast, but the rules around insider trading remain unclear.
Insider Trading on Prediction Markets Raises Alarm
According to reports, a Polymarket user placed a $30,000 bet that Venezuelan President Nicolás Maduro would leave office by January 31, 2026. The bet was made just one day before Maduro was captured by US forces. After the news broke, the user walked away with about $436,000 in profit.
According to Business Insider, New York Democratic Representative Ritchie Torres plans to introduce legislation that would bar federal officials from trading on prediction markets when they possess nonpublic information obtained through their official duties. The report adds that…
— Wu Blockchain (@WuBlockchain) January 5, 2026
The timing raised red flags. Critics questioned whether the trader had access to nonpublic government information.
In response, Democratic Representative Ritchie Torres of New York introduced a new bill. It is called the Public Integrity in Financial Prediction Markets Act of 2026. The bill would ban federal officials and staff from trading on prediction markets when they hold, or could access, nonpublic information through their jobs.
More than 30 House Democrats are backing the bill, including former Speaker Nancy Pelosi.
How the Proposed Law Would Work
Under the proposal, elected officials, political appointees, executive branch employees, and congressional staff would be barred from trading prediction contracts tied to government action or political outcomes.
The bill defines insider information in simple terms. If a reasonable investor would consider the information important and it is not publicly available, then trading on it would be illegal.
I’ve always assumed prediction markets would eventually face insider-trading rules
Not because of politics.
Because of how markets behave once they start working.Once liquidity sticks, prices converge, and contracts start influencing real behavior, regulation becomes a… pic.twitter.com/yosq4RIgmN
— THEDEFIPLUG (@TheDeFiPlug) January 10, 2026
Prediction markets like Polymarket currently do not have strong insider trading bans. Its CEO has argued that insider trading can help reveal hidden information to the public. Polymarket declined to comment on the new bill.
By contrast, rival platform Kalshi already bans insider trading. Its rules block decision-makers from betting on events they influence. Kalshi CEO Tarek Mansour has publicly supported the bill, stating that the platform already adheres to similar standards.
If you’re both a government insider AND a participant in the prediction markets, you have a perverse incentive to push for policies that personally benefit YOU.
That kind of prediction market profiteering among public officials should have no place in the federal government. pic.twitter.com/D22FKX3AFw
— Rep. Ritchie Torres (@RepRitchie) January 9, 2026
Why This Matters for Crypto and Markets
Prediction markets are often linked to crypto and blockchain tools. As they grow, lawmakers are paying closer attention. The Torres bill signals that US regulators want clear lines between public service and personal profit.
For beginners in crypto, the message is simple. Betting on the future is allowed, but using secret government knowledge to do it may soon be against the law.
Disclaimer
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