U.S. lawmakers have proposed fines of at least 10% per transaction to curb insider activity in prediction markets, marking a direct attempt to limit financial incentives tied to nonpublic government information. The bill reflects rising concern that these platforms may expose policy decisions to speculative trading advantages.
Representatives Adrian Smith and Nikki Budzinski introduced the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act on Wednesday. The bipartisan proposal would bar federal officials, including members of Congress and senior employees, from trading contracts linked to elections, legislation, or government actions. The restrictions extend to spouses and dependent children, with profits subject to forfeiture and directed to the U.S. Treasury.
Can Prediction Markets Avoid Insider Information Risks?
The proposal follows increased scrutiny of trading activity on platforms such as Polymarket and Kalshi, where contracts track real-world events. Onchain analysis from Bubblemaps identified accounts with success rates exceeding 90% on geopolitical bets, including military developments. Reported profits approached $1 million across multiple accounts, raising concerns about potential access to privileged information.
Smith framed the issue as a conflict of interest, stating, “Serving the American people is a privilege, not a pathway to profit.”
BREAKING: 🇺🇸 🇮🇷 🇮🇱 Someone made ~$1,000,000 betting on US & Israeli strikes for the last TWO YEARS with near-perfect accuracy using 7 connected Polymarket accounts 🧵 pic.twitter.com/eDKiNKNLMF
— Bubblemaps (@bubblemaps) March 24, 2026
Lawmakers argue that officials with access to policy or intelligence data could influence or benefit from market outcomes. Yet no direct link between government insiders and recent high-performing accounts has been publicly established. But does the perception of insider advantage alone threaten the credibility of these markets?
Regulatory pressure is already building. The Commodity Futures Trading Commission (CFTC) has signaled plans to define federal rules for prediction markets, while some states have increased enforcement activity. Platforms have responded by tightening controls and removing certain markets following public criticism.
The PREDICT Act adds legislative weight to this oversight push, targeting a structural gap rather than individual actors. Market participants will now watch whether Congress advances the bill alongside broader CFTC rulemaking, which could determine how prediction markets operate within U.S. financial law.
