Two U.S. senators have put forward the End Prediction Market Corruption Act to tackle concerns that federal officials might exploit nonpublic government data for profit in event-based trading.
This bill was presented on Thursday by Jeff Merkley and Amy Klobuchar, with support from cosponsors Chris Van Hollen, Adam Schiff, and Kirsten Gillibrand. The legislation aims to ban the president, vice president, and Congress members from engaging in buying or selling event contracts on prediction markets.
The proposal stipulates that elected officials would be completely barred from trading event contracts. Senior officials in the executive branch would encounter restrictions regarding contracts tied to their official responsibilities. Any violations could incur a $10,000 penalty, with enforcement managed through cases initiated in federal court by the U.S. Attorney General.
The bill defines a “senior executive branch official” as a non-elected government employee required to disclose financial information including income, assets, liabilities, transactions, and potential conflicts of interest.
This category encompasses civil servants earning at or above the highest federal pay tier, military officials at the rank of brigadier general or rear admiral and above, senior officials within the Postal Service and the Office of Government Ethics, administrative law judges, and White House staff nominated by the president.
In contrast to elected officials, these senior personnel would be prohibited from trading event contracts that relate directly to their governmental roles. The bill specifies that such involvement may include decision-making, recommendations, advice, investigations, or participation in judicial or administrative proceedings, contractual matters, claims, controversies, accusations, arrests, or other government affairs.
The legislation also proposes disclosure mandates. Elected officials and senior executive branch members will be required to declare in their annual financial disclosures whether they, their spouses, or dependent children engaged in buying, selling, or otherwise exchanging an event contract during the reporting timeframe. If such transactions occurred, the report must outline the contract’s details and its valuation.
Merkley stated that the goal of the legislation is to mitigate the risk of government officials leveraging confidential information to profit from prediction markets.
“When public officials exploit non-public information for personal gain, it jeopardizes public trust in government officials acting in the public interest,” Merkley remarked in a press release unveiling the bill. “Strategically timed bets on prediction markets carry the unmistakable scent of corruption. To safeguard the public’s interest, Congress must act and pass the End Prediction Market Corruption Act to address this detrimental trend to democracy.”
Klobuchar highlighted recent incidents involving questionable prediction market activities. In January, a user on Polymarket allegedly made trades worth hundreds of thousands of dollars predicting that then-Venezuelan president Nicolás Maduro would be ousted less than 24 hours prior to his capture by U.S. forces.
Another trade happened last week when a Polymarket user labeled “Magamyman” purportedly earned $553,000 from a prediction associated with the death of Ali Khamenei just before he was killed in U.S.-Israeli strikes. The identities of these traders remain undisclosed.
“As prediction markets expand, we are witnessing a rise in reports of misconduct,” Klobuchar conveyed in the press release. This legislation enhances the Commodity Futures Trading Commission’s authority to pursue wrongdoers and establishes guidelines to prevent those with confidential government or policy insights from exploiting their knowledge for profit.
In the House of Representatives, Ritchie Torres introduced a companion bill back in January targeting prediction market trading by government officials. This House version would only ban trading when an official has, or potentially can acquire through their official responsibilities, pertinent nonpublic insights.
The Senate version differs in its breadth. It would fully prohibit elected officials from trading event contracts, irrespective of their access to nonpublic information.
The Senate bill additionally delineates penalties and enforcement strategies. In contrast, the House proposal lacks specified penalties or enforcement protocols.
Torres’s bill has been pending in the House Committee on Oversight and Government Reform and the Committee on House Administration for the last eight weeks. No progress has been made in either committee. The Senate proposal has yet to be assigned to a committee.