The tone is seriously rising around Polymarket and Kalshi in the United States. Dozens of Democratic parliamentarians are calling for strengthened monitoring of prediction markets, which they consider increasingly exposed to the risks of insider trading. Their position is firm: no state agent can use privileged information to take a position on the market.
In brief
- More than 40 elected Democrats have asked the CFTC and the Ethics Office to recall the ban on insider betting on prediction markets.
- The suspicions relate to contracts linked to very sensitive political, military and institutional events.
- Polymarket and Kalshi have already started to tighten their internal rules under political and regulatory pressure.
Democrats sound the alarm against insider trading in the markets
On March 29, 2025, more than 40 Democratic Senators and Representatives sent a joint letter to Mike Selig, Chairman of the Commodity Futures Trading Commission (CFTC), as well as the leadership of the U.S. Office of Government Ethics (OGE).
The message is unambiguous: federal officials must stop betting on prediction markets based on confidential information obtained in the course of their duties.
Among the signatories are Senate heavyweights: Elizabeth Warren, leader of the Banking Committee, and Cory Booker, central figure on the Agricultural Committee. Maxine Waters and Angie Craig, Democratic chairs of the House Financial Services and Agriculture committees, respectively, also signed on.
The letter points to specific and disturbing incidents. Contracts appeared to attract highly oriented bets on military operations in Venezuela and Iran, on the exact duration of a speech by the White House spokesperson, or even on the firing of Kristi Noem. Coincidences that are hard to ignore.
The lawmakers' legal argument is strong. The CFTC having classified the Polymarket and Kalshi contracts as regulated derivatives, US law fully applies: any official who exploits non-public information for profit is committing insider trading, period.
Polymarket and Kalshi, the pressure is mounting
This political offensive don't fall into the void. Kalshi and Polymarket have also anticipated the pressure by tightening their internal rules in recent weeks.
Kalshi has implemented technological filters to block sensitive profiles, political candidates, athletes, before they bet on events that they can influence. Polymarket, for its part, now explicitly prohibits positions based on stolen information or illegal “tips”.
However, are these adjustments enough? Not in the eyes of Washington. Federal prosecutors have already contacted these platforms to assess whether certain cases warrant prosecution.
At the same time, the CFTC is working to develop a new regulatory framework, publicly questioning the vulnerability of these markets to manipulation and abusive practices, including when they are based on blockchain.
For the crypto ecosystem, the signal is clear: onchain transparency no longer constitutes a shield against compliance requirements. These platforms, long presented as simple aggregators of collective information, are now treated as financial products with systemic risk. The older they get, the more the control intensifies.
Decentralized prediction markets have long surfed on legal ambiguity, presenting themselves as simple aggregators of collective opinion. But once American officials could gamble on decisions they make themselves, political tolerance collapses. Crypto is no exception to a rule as old as finance: the bigger a market gets, the more the regulator moves in.
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