Lawmakers Press CFTC on Prediction Market Oversight

TLDR

• At least 42 Democratic lawmakers asked the CFTC and the Office of Government Ethics to warn federal employees about insider trading in prediction markets.
• The lawmakers requested executive branch guidance and a formal briefing from regulators by April 13.
• The letter cited trades linked to Nicolás Maduro and a White House press briefing as examples of concern.
• Lawmakers said the STOCK Act bars government officials from using nonpublic information for personal gain.
• The CFTC has classified event contracts as derivatives, which places them under insider trading rules.

At least 42 Democratic lawmakers have urged federal regulators to address insider trading risks in prediction markets. They sent a letter to the Commodity Futures Trading Commission and the Office of Government Ethics. They asked both agencies to warn federal employees against using nonpublic information for trades.

Lawmakers Urge CFTC Action on Prediction Market Oversight

The lawmakers directed their letter to CFTC Chair Mike Selig and the ethics office. They cited “multiple incidents” that raised speculation about insider trading by federal employees. They asked both agencies to issue executive branch guidance without delay.

They wrote, “We ask that the Commodity Futures Trading Commission and the Office of Government Ethics circulate executive branch-wide guidance.” They said federal employees must refrain from insider trading in prediction markets. They also requested a formal briefing and written answers by April 13.

The group asked whether the CFTC has investigated reports involving federal workers. They also asked what steps the agency takes to detect and prevent insider trading. They argued that regulators must clarify compliance duties across the executive branch.

Lawmakers pointed to the STOCK Act, which former President Barack Obama signed in 2012. The law bars government officials from using material, nonpublic information for personal gain. They said this prohibition covers trading in regulated derivatives.

They stated that the CFTC classifies event contracts as derivatives. They wrote, “The CFTC has determined that event contracts are derivatives.” They added that insider trading bans under the Commodity Exchange Act apply to such activity.

Venezuela Capture Bet, White House Speech Contracts Flagged

The letter cited trades tied to the capture of Venezuelan President Nicolás Maduro. Lawmakers said users placed bets before public developments became clear. They raised concerns that insiders may have influenced those positions.

They also flagged contracts tied to White House press secretary Karoline Leavitt’s Jan. 7 speech. Users wagered on the length of her remarks during that event. Lawmakers said such trades could involve access to nonpublic schedules.

They referenced reports about trades linked to a possible invasion of Iran. They also mentioned contracts tied to the death of Ayatollah Khamenei. They said these trades sparked national security concerns about signaling potential actions.

The letter cited trade-offs on whether former DHS Secretary Kristi Noem would face dismissal. Lawmakers said suspicious patterns appeared in several markets. They argued that these incidents justify clearer federal guidance.

Prediction markets allow users to trade contracts on future events. Platforms such as Kalshi and Polymarket operate in this sector. Both companies have announced plans to add guardrails to limit improper activity.

Lawmakers asked the CFTC to explain its monitoring tools. They requested details on coordination with the Office of Government Ethics. They set April 13 as the deadline for agency responses.

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