WASHINGTON (AP) — Federal lawmakers are demanding stronger oversight of prediction markets after an anonymous bettor collected more than $400,000 on a January wager that Venezuelan President Nicolás Maduro would be ousted, raising alarm that government insiders may be profiting from classified information at the expense of market integrity and public trust.
The Associated Press reported this month that a group of new accounts on Polymarket made highly specific, well-timed bets on whether the U.S. and Iran would reach a ceasefire on April 7, resulting in hundreds of thousands of dollars in profits for those new customers. On the same day that report was published, the White House warned staff against using private information to trade on prediction markets.
Betting on Service Members' Lives
The scrutiny comes amid broader concern in Washington over prediction markets, online exchanges that allow users to bet on outcomes ranging from baseball games to when Jesus Christ will return. Members of both parties pressed the leader of a typically low-profile regulatory agency on the issue during a hearing on Thursday, and the market debate is also drawing in the White House, potential presidential candidates and state leaders. Kristin Johnson, a former commissioner at the Commodity Futures Trading Commission, said, "It's a national conversation about what it means to have market integrity."
Rep. Seth Moulton, D-Mass., said he shared a screenshot of Polymarket activity involving bets on when an airman whose fighter jet was shot down by Iran would be rescued. At the time, an April 3 rescue was trading at 15% compared with 63% who were betting on April 4. After Moulton posted the screenshot and called it a "dystopian death market," Polymarket stopped the betting, saying the market "does not meet our integrity standards." Moulton, a former Marine who served four tours in Iraq, said he was "absolutely not satisfied with Polymarket's response" and blamed the site for being "completely unwilling to self-regulate when it comes to betting on the lives of our service members." He added, "This is war profiteering and Congress needs to step in and stop it."
Bipartisan Push for Accountability
Sen. Todd Young, an Indiana Republican and former Marine, said he had been concerned about trading in the sports market, "but I became especially concerned about market distortions, improper decision making, and undermining of public trust through self-enrichment after the news broke about Venezuela." Young and Sen. Elissa Slotkin, D-Mich., have introduced a bill that would bar federal employees from using nonpublic information to make bets on prediction markets. Their bill is among several bipartisan efforts in Congress to regulate prediction markets. Young said, "But I think we can all agree at this early stage, as usage of these platforms grows and real money is put at stake, that this is a measure that should be taken immediately."
As he eyes a potential presidential campaign, Democrat Rahm Emanuel proposed a ban on prediction market bets by all federal employees and their families. On Wednesday, he suggested a 10% fee on those markets and online gambling to fund science and health research. California Gov. Gavin Newsom, another potential Democratic presidential candidate, issued an executive order barring his appointees from using nonpublic information to trade on prediction markets.
Regulatory Gaps and Industry Ties
Polymarket, founded in 2020, operates largely offshore with limited functions in the U.S. that were allowed only after President Donald Trump returned to office. Polymarket officials did not comment for the story. Donald Trump Jr., the president's son, is on Polymarket's advisory board and is a paid adviser for Kalshi. 1789 Capital, the venture capital firm where Trump Jr. is a partner, has invested in Polymarket. Kalshi, founded in 2018, says it already bans many of the most extreme betting markets and welcomes regulation. Kalshi spokesperson Elisabeth Diana said, "We support Congress and regulators taking action to police insider trading, keep prediction markets onshore and under federal regulation. Not all prediction markets are the same." White House spokesman Davis Ingle said Trump has been clear that "members of Congress and other government officials should be prohibited from using nonpublic information for financial benefit."
The Commodity Futures Trading Commission, which regulates prediction markets in the U.S., is now served by only one member, Michael Selig, a former CFTC law clerk who went on to represent cryptocurrency clients before Trump appointed him to lead the agency. The agency is supposed by law to have a five-member board including representatives of both political parties. Dennis Kelleher, the president and chief executive of Better Markets, said the agency "certainly has no experience, expertise, budget, technology to actually in any way supervise, regulate or police gambling on everything from whether it's Iran, Venezuela, whether it's reality TV, whether Christ is going to come back before the end of the year." Sen. Richard Durbin, D-Ill., sent Selig a letter in February noting that the number of enforcement attorneys at the agency's Chicago office had declined from 20 to zero. During a Thursday hearing of the House Agriculture Committee, which oversees the CFTC, Selig said the agency was hiring new staff and operating more efficiently. He refused to hold off on completing new regulations until new members were added to the board but said he was taking the potential of insider trading seriously. "Nothing is more important than protecting market integrity," he said.
Asked at a recent Vanderbilt University forum about the CFTC's approach to insider trading in unregulated offshore prediction markets, Selig blamed the Biden administration for creating a regulatory environment that he said discouraged companies from operating in the U.S. As the debate plays out in Washington, multiple states have tried to curtail prediction markets, arguing they are essentially operating as unlicensed gambling platforms. The CFTC has responded by suing Connecticut, Arizona and Illinois this month. For now, there is no immediate path to passage for any of the bills, but lawmakers broadly agree that something should be done to address prediction markets.
Why This Matters:
The explosion of largely unregulated prediction markets raises fundamental questions about who benefits when public institutions lack the resources and authority to protect ordinary citizens from exploitation. When government insiders can potentially profit from classified information while enforcement staff at the federal agency responsible for oversight has been reduced to zero in key offices, the playing field is anything but level. The ability of platforms to operate offshore while maintaining ties to political power brokers underscores the need for democratic accountability in financial markets. Without strong regulation and enforcement, these platforms risk becoming vehicles for those with access and connections to enrich themselves at the expense of market integrity and public trust. The bipartisan legislative efforts and state actions reflect growing recognition that collective action through government oversight is essential to prevent war profiteering and insider trading that undermine both economic fairness and respect for service members' lives.