US Representative Ritchie Torres is preparing to introduce new legislation that would place tighter restrictions on insider trading within political prediction markets following growing scrutiny over a highly profitable and controversial wager.
The proposal has emerged amid concerns that individuals with access to sensitive government or military information could exploit prediction markets for personal financial gain.
According to a Sunday post shared publicly, Torres plans to introduce the Public Integrity in Financial Prediction Markets Act of 2026.
The bill would prohibit federal elected officials, political appointees, and executive branch employees from trading certain prediction market contracts when they possess nonpublic information obtained through their official duties.
What the Bill Would Cover
The proposed legislation would apply to prediction market contracts linked directly to government policy decisions, official government actions, or political outcomes.
It would restrict buying, selling, or exchanging these contracts on platforms that operate across state lines and engage in interstate commerce.
“The restriction applies to buying, selling, or exchanging prediction market contracts tied to government policy, government action, or political outcomes on platforms engaged in interstate commerce,” Jake Sherman said.
The framework closely mirrors insider trading standards already enforced within traditional financial markets.
However, the bill would formally extend those principles into the fast-growing and lightly regulated prediction market industry.
High-Profile Maduro Bet Raises Alarm
The legislative push follows a high-profile trade that drew widespread attention earlier this month.
A newly created account reportedly placed roughly $32,000 on a contract predicting Venezuelan President Nicolás Maduro would be removed from power by January 31, 2026.
Within hours of the trade, US forces reportedly captured the Venezuelan leader, triggering the contract’s settlement.
The trader ultimately secured more than $400,000 in profit almost overnight.
The account showed minimal previous trading activity, with the Maduro wager accounting for nearly all of its gains.
This unusual pattern fueled speculation that sensitive political or military information may have been improperly used.
Platform Responses and Existing Rules
In response to the controversy, prediction market operators emphasized their internal compliance standards.
Kalshi said its rules already prohibit insiders, decision-makers, or affiliated individuals from trading on material nonpublic information.
Platforms have argued that existing safeguards are designed to prevent manipulation and maintain market integrity.
Nonetheless, lawmakers appear increasingly focused on establishing clearer federal oversight.
Polymarket Security Issues Add to Concerns
The insider trading debate emerged as Polymarket faced separate scrutiny over account security problems.
Several users reported unauthorized login attempts followed by closed positions and sharply reduced balances.
Users said their devices and other online accounts showed no signs of compromise.
Polymarket later stated that the issue stemmed from a vulnerability introduced by a third-party authentication provider.
The company said the issue was resolved, affected only a limited number of users, and posed no ongoing risk.
Polymarket added that impacted users would be contacted directly.
