Over 40 Democrats in the U.S. House and Senate signed a letter to top administration regulators and ethics officials on Monday asking for governmentwide training on insider trading in prediction markets.
The letter to the Commodity Futures Trading Commission and the Office of Government Ethics comes after weeks of increasing scrutiny regarding potential insider trading by government employees using prediction markets like Polymarket and Kalshi.
The letter highlights concerns that federal employees may have used insider knowledge to make hundreds of thousands of dollars in profit from trades relating to the capture of Nicolás Maduro, the death of Iran’s Supreme Leader Ali Khamenei and the length of White House press conferences. To date, no federal employee has faced federal charges related to insider trading on event-driven news.
“Given the exponential growth in prediction market trading, rising evidence suggesting possible governmental insider trading in prediction markets, and potential confusion surrounding existing law in this area, we ask that the CFTC and OGE issue guidance reminding federal employees of their existing legal obligation to refrain from using their insider governmental information to profit from prediction market trades,” the letter states.
The letter notes that federal employees are prohibited by the Commodities Exchange Act and the STOCK Act from entering into futures contracts or similar types of trades using nonpublic information they gain from their government postings. Prediction markets use these contract mechanisms to allow people to bet on whether certain events will happen.
The CFTC oversees these types of contracts and is currently seeking public feedback about new regulations that might be required to confront the rise of prediction market betting.
The letter, organized by Sen. Elizabeth Warren, D-Mass., was signed by senators including Kirsten Gillibrand, D-N.Y., Jeff Merkley, D-Ore., and John Hickenlooper, D-Colo., and representatives including Salud Carbajal, D-Calif., Seth Moulton, D-Mass., and Betty McCollum, D-Minn.
In a statement, White House spokesman Kush Desai said, “All federal employees are subject to government ethics guidelines that prohibit the use of nonpublic information for financial benefit.”
“However, any implication that Administration officials are engaged in such activity without evidence is baseless and irresponsible reporting,” he added.
In addition to requesting staff-level guidance on the prohibitions surrounding insider trading, the letter also asks the office leaders whether the CFTC has already investigated reports of insider trading on prediction markets by federal employees and what steps the CFTC will take to ensure prediction markets are better detecting and preventing potential insider trading by federal employees.
“It’s not fair for anyone, especially federal officials, to use inside information when betting on prediction markets,” Warren told NBC News. “Donald Trump’s CFTC shouldn’t let public officials get away with rigging prediction markets against working people.”
