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Congress Watches Closely as Election Markets Draw Fresh Scrutiny
16 September 2026
Congress is moving on multiple fronts — investigations, Senate restrictions, and new bills — as prediction markets tied to elections and politics draw fresh concerns about insider trading and public trust.
Prediction Markets: A Growing Concern
Prediction markets allow users to buy and sell contracts tied to specific events, from political election results to geopolitical developments. Over the past two years, these markets have exploded in popularity, but they are now facing heightened scrutiny from regulators and legislators.
The rise of prediction markets has prompted concerns about insider trading and the potential manipulation of contracts related to government actions, elections, and military engagements. According to the Congressional Research Service, prediction markets have grown exponentially in recent years, attracting increasing attention from lawmakers and watchdogs wary of abuses and conflicts of interest.
House opens probe into political prediction markets
The House Oversight Committee is investigating potential insider trading in election-related prediction markets, including those on Kalshi and Polymarket platforms. Announced by Committee Chair James Comer, the probe focuses on unusual trades ahead of key political events and major U.S. military actions.
"Electoral prediction markets and betting on political events are growing," the Committee said in a statement, "And it's absolutely inappropriate and unacceptable for sitting members of Congress to be trading on their own ability to influence or predict."
The investigation comes in the wake of traders placing bets before major policy developments, such as U.S. military operations in Venezuela and Iran. The House is seeking to determine if legislators and their staff traded on inside information or used White House influence to place advantageous bets.
Senate bans staff and members from trading on prediction markets
Amid the mounting scrutiny, the U.S. Senate has taken immediate action to ban its own. In a bipartisan move, senators and their staff are now prohibited from buying or selling contracts on prediction markets.
The temporary resolution, which requires passage of permanent legislation to continue, comes after reports that senators had traded on contracts related to U.S. military action in Iran. Limiting potential conflicts of interest will be a key focus of the legislative efforts ahead.
"This legislation is about maintaining citizens' confidence in our institutions, especially on matters of war and diplomacy," said Senator John Kennedy (R-LA), who introduced the ban along with Senator Joe Manchin (D-WV).
Steil drafts measure to bar lawmakers from related markets
Rep. Bryan Steil (R-WI), chair of the House Oversight Committee, is preparing new legislation to prohibit current lawmakers from investing or trading on prediction markets related to elections and politics. The proposal extends the restrictions to former members of Congress and political candidates.
Talks are also underway on insider trading restrictions that could apply to any market contracts tied to military actions, sports events, or other high-profile happenings. The goal is to prevent members of Congress from initiating or directly profiting from government announcements, Steil said in a statement.
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Steil's proposed ban comes a month after the CFTC issued an advisory on insider trading on prediction markets and affirmed its role in oversight. In February 2024, the CFTC said it has full authority to police illegal trading and that contracts tied to public events raise significant concerns.
The CFTC advisory cited recent enforcement actions by Kalshi, including one against a political candidate who traded on his own election bid. An employee of the prediction market also placed bets related to a specific political event, all of which drew scrutiny as insider trades.
Lawmakers considers CFTC-style oversight for prediction markets
As legislators move to limit the activities of lawmakers and staff in prediction market trading, they are also considering giving federal regulators more oversight of the markets themselves.
Congress appears to want CFTC-style oversight over insider trading in political markets. That includes bringing prediction markets under SEC-style regulations, in hopes it can limit the insider trading that appears to be on the rise.
In committee, House Speaker Mike Johnson (R-LA) said regulators should approach insider trading on prediction markets similarly to how the SEC handles illegal trades on public companies.
"If someone on the inside is trading on secrets or non-public information, it needs to be treated as insider trading," Johnson said, before warning that legislators would lose their advantage if regulation didn't address contract types consistently across markets.
The bipartisan bills under consideration cover a broad set of event contracts, from elections to military matters and sports events. The goal is to ensure that prediction market trading does not give rise to insider abuses or erode public trust.
Open Questions on Prediction Market Oversight and Speculation
As prediction markets face increasing scrutiny, the central question for Congress is whether to impose narrow ethics restrictions on lawmakers and staff or to craft broader guardrails for the markets themselves.
Legislative efforts spanning the House and Senate, if enacted, could redefine what is and isn't permissible in a rapidly evolving segment of the market. Particularly as new players and new types of contracts proliferate, regulators are looking at establishing basic rules of the road.
From insider trading to public confidence in the political process, lawmakers are seeking to balance a free market in information while preventing abuses that could delegitimize the role of the public in setting government policy. As prediction markets grow with daily trading now in the billions, there is urgency to establish ground rules for a practice that is only becoming more common.