Prediction market platforms such as Kalshi and Polymarket could face increased scrutiny from Congress amid rising concerns about potential insider trading tied to recent geopolitical events.
According to a Politico report, both platforms saw unusual trading activity related to the war with Iran, raising questions among lawmakers about whether users may have profited from nonpublic information.
The developments have accelerated efforts on Capitol Hill to regulate the fast-growing industry.
"There seems to be a growing consensus that the status quo is unsustainable," Rep. Ritchie Torres, D-N.Y., told Politico.
Lawmakers in both chambers are beginning to engage more actively. Members of the Senate Commerce Committee have discussed holding a hearing on prediction markets, while the House Agriculture Committee has already conducted briefings on the issue, according to the report.
House Minority Leader Hakeem Jeffries, D-N.Y., signaled openness to bipartisan action.
"It is reasonable for us to take a look at what can be done in this space and to try to find a bipartisan path forward," Jeffries said.
At the center of the debate is how prediction markets should be classified and regulated. Some states, including Arizona and Massachusetts, argue the platforms function similarly to sports betting or casinos and should be regulated accordingly — a claim the companies dispute.
Attorneys following the issue expect the legal fight could ultimately reach the Supreme Court.
Meanwhile, Sens. Adam Schiff, D-Calif., and John Curtis, R-Utah, have introduced legislation that would restrict platforms like Kalshi and Polymarket from offering services resembling sports betting.
Rep. Bill Foster, D-Ill., echoed that view, arguing such activity lacks broader economic value.
"Anything that has no economic purpose, I think, should be taxed like gambling, regulated like gambling," Foster said.
Kalshi and Polymarket maintain their platforms offer legitimate financial products rather than gambling, emphasizing their role in forecasting and risk assessment.
The industry also has some political support, including from Mike Selig, chair of the Commodity Futures Trading Commission, and Republican Sens. Dave McCormick of Pennsylvania and Bill Hagerty of Tennessee.
Separately, amid concerns about insider trading tied to government decisions, Reps. Nikki Budzinski, D-Ill., and Adrian Smith, R-Neb., have introduced legislation to bar members of Congress and executive branch officials from participating in prediction markets related to public policy or political events.
Kalshi says it has safeguards in place to prevent insider trading.
"Prediction markets are an emerging technology, yes, but they're not all the same, and we want to highlight those big distinctions," Kalshi spokesperson Elisabeth Diana told Politico.
Sam Barron ✉
Sam Barron has almost two decades of experience covering a wide range of topics including politics, crime and business.
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