Congress is racing to impose new rules on online prediction markets after multiple insider trading scandals exposed gaping holes in oversight of platforms where Americans bet billions on everything from elections to economic data.
Lawmakers have introduced more than a dozen bills this year targeting betting markets like Kalshi and Polymarket, which allow users to wager real money on political outcomes, Federal Reserve decisions, and corporate earnings reports. The legislative push follows revelations that government employees and corporate insiders allegedly profited by betting on information they knew before the public did.
The scramble mirrors Congress’s belated responses to cryptocurrency and artificial intelligence — emerging technologies that raced ahead of Washington’s ability to regulate them. By the time lawmakers grasped what was happening, the horse had already left the barn.
Prediction markets exploded in popularity during the 2024 election cycle, when millions of Americans used them as alternatives to traditional polling. The platforms allow users to buy and sell contracts based on whether specific events will occur, with prices reflecting the crowd’s collective judgment about probability.
But the same features that made prediction markets useful for forecasting created perfect conditions for abuse. A Treasury Department employee allegedly made $47,000 betting on inflation data hours before its public release. A pharmaceutical executive faces federal charges for wagering on his own company’s FDA approval before the announcement.
The proposed legislation varies widely in approach. Some bills would ban government employees from participating in any prediction markets. Others would require platforms to monitor for suspicious trading patterns and report potential insider activity to regulators. Several would give the Commodity Futures Trading Commission expanded authority to oversee the markets, which currently operate in a regulatory gray zone.
Industry representatives argue that heavy-handed regulation could destroy the markets’ core value — aggregating dispersed knowledge to produce better forecasts than expert predictions. They point out that traditional financial markets face insider trading laws, and prediction markets should operate under similar frameworks rather than face outright bans.
The regulatory confusion stems partly from uncertainty about what prediction markets actually are. Are they gambling platforms, financial exchanges, or information markets? The answer determines which federal agency has jurisdiction and what rules apply.
For now, the platforms continue operating while Congress debates. What’s clear is that another technology moved faster than the government’s capacity to oversee it, leaving ordinary Americans to navigate an unregulated landscape while insiders potentially game the system.
Key Points
- Congress has introduced over a dozen bills to regulate online prediction markets following multiple insider trading scandals involving government workers and corporate executives
- The legislative response comes years after these platforms gained mainstream popularity, repeating Washington’s pattern of lagging behind emerging technologies
- Proposed regulations range from banning federal employees from participating to giving regulators new oversight powers, with no consensus on how to classify the markets
https://www.axios.com/2026/05/19/prediction-market-kalshi-polymarket-bill-congress – May 19, 2026
