WASHINGTON, D.C. — Platforms that look like a cross between stock trading apps and sports betting sites are letting people wager on everything from elections to global conflicts and Federal Reserve decisions to military operations.
But as billions of dollars move through these prediction markets, concerns are growing about some traders placing bets using information the public doesn’t have.
Prediction markets like Kalshi and Polymarket are exploding in popularity, letting users trade on real-world events. Contracts rise and fall based on what people think will happen next.
The size of market activity in the first quarter of 2026 was between roughly 40% larger than it was for all of 2025. But as the money pours in, so do ethics concerns- especially after recent suspiciously well-timed bets on military operations.
“Insider trading, number one, should be illegal,” said Jack Bergman, R-Mich.
“I think it is extremely distasteful. You don’t go into public service to enrich yourself,” said Nick Langworthy, R-N.Y. “We should have safeguards in place, and honestly, people that go into public service should know better.”
In early April, the White House warned staff against insider trading amid the Iran conflict, following a surge in suspicious prediction market activity. The alert came after President Donald Trump delayed a key Strait of Hormuz deadline. Just minutes before, traders placed over $500 million in oil price predictions, poised to profit.
“It looks like insiders have been making out like bandits using secret information about the war,” said Elizabeth Warren, D-Mass., during a recent Senate hearing with Pentagon officials. “On March 23rd, just 14 minutes before Trump unexpectedly posted about, quote, ‘very good conversations on ending the war,’ traders suddenly bet $500 million on the price of oil, which once Trump made his announcement, immediately dropped. It happened again on April 7 and then again on April 21 — a surge in oil bets, then a Trump post, and then a huge shift in oil prices in just the space of minutes.”
In late April, federal prosecutors unsealed an indictment, charging a U.S. Army master sergeant who they say used classified info tied to the capture of then-Venezuelan President Nicolás Maduro, placing a roughly $33,000 bet and walking away with more than $400,000.
It’s the first major insider trading case tied to prediction markets, and one that also raises national security concerns.
“If classified data was used to make a bet, and therefore potentially put American forces at risk because of the adversaries gaining information, then that person who does that has violated the Uniform Code of Military Justice and needs to be dealt with accordingly,” said Bergman, who served as a lieutenant general in the United States Marine Corps.
Now, U.S. senators Dave McCormick, R-Pa., and Kirsten Gillibrand, D-N.Y., are teaming up on bipartisan legislation to ban members of Congress and certain executive branch employees from participating in prediction markets.
“It doesn’t allow people in the executive branch above a certain level to participate in prediction markets. I think that’s a good idea because when you’re in these positions, you can be privy to information which could benefit you somehow,” McCormick said.
“This commonsense, bipartisan bill puts strong guardrails in place to protect consumers, prevent insider trading, and hold prediction market platforms to standards of integrity,” Gillibrand said.
McCormick says the Prediction Market Act of 2026 will also position the U.S. to lead the responsible development of the emerging industry, instead of pushing it offshore.
“We want this innovation to happen here. Prediction markets give a lot of crowdsourcing of information because how people bet, how people invest in prediction markets, will give insight into what people think is actually going to happen,” McCormick said.
The Commodity Futures Trading Commission is the primary regulator of prediction markets in the U.S., but McCormick believes Congress can enhance the regulatory framework of the industry by passing his bill.
“We need to do this in a way that we protect consumers and ensure that… America remains the leader in financial markets, innovation — prediction markets being one of them — and that we protect the integrity of the market,” McCormick said. “This legislation, I think, will create the kind of framework and the kind of guardrails that I suspect most Americans and most Pennsylvanians would appreciate.”
The U.S. Senate passed a resolution Thursday to ban senators from trading on these platforms.
