U.S. lawmakers are preparing new restrictions on prediction market platforms after high-profit trades coincided with a major foreign policy action. The focus is on whether insiders used nonpublic information to place political wagers.
Congress Curbs Insider Trading in Prediction Markets
Representative Ritchie Torres will soon introduce the Public Integrity in Financial Prediction Markets Act of 2026. In an X post, Punchbowl News founder Jake Sherman reorted the plan. The bill targets trading activity by federal officials and senior government employees.
Under the proposal, elected officials, political appointees and staff in the executive branch would be prohibited from trading prediction contracts based on possible policy or political outcomes. The limitation would be imposed when those officials have, or could reasonably obtain, nonpublic information through their official job. In response to Sherman X post, Kalshi stated that trading on material nonpublic information is prohibited under its rules.
The announcement came on the heels of intense watch for prediction market reporting on Venezuela. President Donald Trump admitted that the U.S. had capture Venezuela President Nicolas Maduro in overnight military strikes on Caracas.
Trading behavior ahead of that disclosure drew attention. As Axios reported, there is a Polymarket account, which was opened towards the end of December and has made four bets regarding the U.S. response only in Venezuela. It had lost about $32,500 accounts on contracts that Maduro will be gone by January 31.
Those shares were purchased when implied odds were in the low single digits to $1. The contracts settled at an amount close to one after the Maduro arrest was confirmed. The trades made more than $400,000 in less than 24 hours.
Price movements before the announcement added to concerns. The Wall Street Journal announced that the market associated with the ousting of Maduro started to increase just before 10 p.m. ET on Friday. That was a change that took place several hours before public disclosure.
Analytics Firm Flags Unusual Wallet Trades
Later, blockchain data analytics firm Lookonchain reported three Polymarket wallets that bet huge sums mere hours before the arrest. The wallets were created and funded days before, the firm said. Each wallet had only focused on Venezuela-related outcomes and did not have any history of other trades.
The platform said it had taken out combined profits of over $630,000 from the three wallets. Individual gains ranged from about $75,000 to over $400,000. The firm publicly labeled the pattern as being indicative of insider trading.
However, the proposed legislation is one of the most explicit attempts in Congress to regulate behavior in the burgeoning prediction market industry so far.
Source: https://coingape.com/prediction-markets-face-scrutiny-after-maduro-arrest/
