More than 40 Democrats in the US Senate and House of Representatives sent a letter to a federal regulator and to ethics officials, asking them to warn government officials that insider trading in derivatives is illegal and that bets they make on prediction market companies like Polymarket and Kalshi qualify under that category.
The ranking Democrats on the Senate Banking Committee (Senator Elizabeth Warren) and the Senate Agriculture Committee (Cory Booker) joined dozens of their colleagues in asking Chairman Mike Selig, head of the Commodity Futures Trading Commission, and the heads of the US Office of Government Ethics to “circulate the executive branch to explain that to explain that to explain to the top Federal Trade officials to explain that guidance from leading trade-related trading must happen. markets.”
The request was spurred by the outbreak of suspicious reports that recent event contracts for government or military action appeared to draw bets from people with special insight into the results, leading many to believe that officials – or people associated with them – may have made such bets. US derivatives laws state the illegality of officials making trades based on non-public information they obtained on the job. Since the CFTC has declared the contracts of such firms to be regulated derivatives, the ban should stand, the lawmakers argued.
“We request that the CFTC and OGE issue guidance reminding federal employees of their existing legal obligation to refrain from using their insider government information to take advantage of predictable market trades,” the letter, dated March 29, said.
The instances of potential insider trading detailed in the letter included contracts for military actions in Venezuela and Iran, the length of a speech by President Donald Trump’s press secretary and the firing of former Homeland Security Secretary Kristi Noem.
The letter was also signed by the top Democrats on the House Agriculture Committee, Rep. Angie Craig, and the House Financial Services Committee, Rep. Maxine Waters. The agriculture panels of both chambers are the ones that directly oversee the CFTC.
Selig’s CFTC has been working on a new set of policies to govern the prediction markets. These companies are closely tied to the crypto industry, which is a current focus for many of the lawmakers on this letter, who are also working on the Digital Asset Market Clarity Act that has been stalled in the Senate.
Also on Monday, news emerged that federal prosecutors were reportedly talking to prediction market firms about whether certain cases could trigger insider trading cases.
