Democrats Seek Ban on Insider Trading in Prediction Markets

More than 40 Democratic members of Congress have called on federal regulators to issue clear guidance prohibiting government employees from using nonpublic information to trade on prediction markets, citing a series of suspicious bets tied to sensitive geopolitical and political events.

In a letter dated March 29 and addressed to the Commodity Futures Trading Commission (CFTC) and the Office of Government Ethics (OGE), the lawmakers highlighted incidents that suggest possible insider activity. They requested executive branchwide directives reminding federal workers of their obligations under existing laws, along with a briefing by April 13 on any ongoing investigations and detection measures. The group, led by figures including Senate Banking Committee Ranking Member Elizabeth Warren and Senate Agriculture Committee Ranking Member Cory Booker, argued that prediction market contracts qualify as derivatives regulated by the CFTC, bringing them under the scope of the 2012 STOCK Act. That law prohibits public officials from profiting from material nonpublic information obtained through their positions.

The letter pointed to specific examples of trades that raised red flags. These...