Some bets should stay between you and your friends — and bets by public officials tasked with stewarding the public interest should not be placed at all. The sheer volume of activity on prediction markets, through which individuals can place bets on the outcome of future events, provides perfect cover for traders seeking to profit on insider information. 

Concerns about insider trading on these markets have been growing for months, coming to a pivotal point in April when U.S. soldier Gannon Ken Van Dyle was charged with allegedly using confidential government information to bet on Polymarket, a prediction marketplace. Van Dyke profited more than $400,000 by wagering on an event contract related to the ousting of Venezuela’s president, Nicolas Maduro, an operation in which he was personally involved.

Besides this charge, individuals with insider knowledge are clearly betting on political events. Two separate, notable instances of political trading teetered on the line of corruption. Kalshi discovered three congressional candidates traded on their own elections on the platform, and an anonymous trader secured a profit of more than $300,000 from correctly betting on four individuals getting pardoned by former President Joe Biden. Four out of many possibilities.

These developments have left the public unsettled and frustrated, as those responsible for national security and the well-being of the public use insider knowledge on government decisions to exploit their office for private gain.

The public should not have to wonder whether federal officials are focused on the public interest or their next potential windfall in prediction markets. Elected officials and their employees should be unequivocally clear, through binding legislation, that prediction markets cannot continue as they are and have no place in politics.

The Senate recently took the first step by voting on a resolution to ban senators and Senate staff from trading on prediction markets. The House should pass a similar resolution, and both chambers must coalesce to pass comprehensive legislation that ensures federal officials can’t profit in prediction markets.

Lawmakers must also make sure that the government better regulates prediction markets for all users. While the charge against Van Dyke marks an important step toward accountability, it does not address the root of the issue: why was he able to place a bet on an active military operation in the first place when it is prohibited under current regulations?

As the primary regulator of these prediction markets, the Commodity Futures Trading Commission is not meaningfully enforcing the rules. Our legal and regulatory structure is no longer sustainable to address the outpour of trades. We are now seeing the consequences.

The ability to trade with insider knowledge is possible because it’s unclear whether existing statutes apply to prediction markets. Even where there are clear laws, the rules are loosely enforced. For example, event contracts that arguably violate current regulations, such as those related to the ongoing wars, are actively being traded online. It remains unclear whether laws such as the Ethics in Government Act and STOCK Act cover prediction markets. If they do, the penalties under these statutes have been little more than a slap on the wrist.

Congress granted the Commodity Futures Trading Commission too much discretion in overseeing these markets; when you pair that with the lack of explicit laws, it essentially created a big question mark of what accountability looks like when the commission itself is falling short of its duties. It becomes even more complex when the commission relies on platforms to regulate themselves. This creates inconsistent standards of accountability and dilutes regulatory enforcement.

With this notable gap, Congress must act on two fronts: ban itself and federal officials across all three branches from trading on these markets, and enact clear statutes directing the Commodity Futures Trading Commission on the types of bets that are prohibited. Additionally, any individual should be flat-out banned from betting on deaths, electoral outcomes, and government and military action. Implementing and enforcing meaningful penalties to deter further insider trading on these platforms should also be an essential focus. 

During the April 16 hearing in front of the House Agriculture Committee, Commodity Futures Trading Commission Chairman Michael Selig reasserted multiple times that the commission has a “zero tolerance policy when it comes to fraud, manipulation, and insider trading.” It’s time for Congress to work with the commission to hold these prediction markets accountable and strengthen the law.

There have been too many suspicious trades to ignore, and more concerning bets to anticipate in an election year. Extensive structural and preventative reforms from the commission and Congress are necessary. It would be timely for Congress to demonstrate to the public that money does not mix with politics, and that the corruption these markets pose is a cross-partisan issue. 

Janice Luong is policy analyst at the Project on Government Oversight’s Effective and Accountable Government team.

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