Prediction markets have grown into a multi-billion-dollar industry, with billions wagered each week on platforms like Kalshi and Polymarket. While these markets have long catered to sports betting, they now allow users to place wagers on political events — including when lawmakers might retire or drop out of a race, and even international conflicts. The growth has raised questions about whether U.S. lawmakers, their staffs or family members could be leveraging sensitive information to financially benefit from these markets with little oversight.

The issue gained urgency in the hours leading up to the joint U.S.-Israeli attack on Iran, when bets on a potential strike were being bought and sold on prediction markets. One trader named 'Magamyman' won $553,000 on those well-timed bets. The activity has sparked concerns about insider trading risks and whether current ethics disclosure requirements adequately cover these new financial instruments.

What the Right Is Saying

Republicans have taken a different approach. Rep. Blake Moore, R-Utah, introduced legislation that would ban certain types of event contracts related to war and elections rather than prohibiting specific officials from betting. 'It could go in a very bad direction if some staffer of some member of Congress or something knows when that person is going to retire and then makes a profit,' Moore said. 'It's basic stuff. We shouldn't be allowing for that to happen.'

The CFTC, under the Trump administration, has defended its role as the sole regulator of prediction markets. Chairman Michael Selig has criticized states and lawmakers calling for more regulation, writing that 'CFTC-registered entities must collect customer information to enforce anti-money-laundering measures and prevent insider trading. These exchanges aren't the Wild West, as some critics claim, but self-regulatory organizations that are examined and supervised by experienced CFTC staff.'

Moore argued that states need more control over sports betting regulation. Both Moore and Merkley acknowledged growing momentum for legislation but did not offer a clear pathway for passage, especially given Congress's ongoing struggle to pass stock trading bans for members.

What the Left Is Saying

Senate Democrats have been vocal in calling for immediate action. Sen. Chris Murphy, D-Conn., posted on X that 'it's insane this is legal,' accusing members of President Trump's orbit of 'profiting off war and death' — though Murphy did not cite specific evidence to support his claims. The White House denied the accusation.

Sen. Jeff Merkley, D-Ore., introduced legislation last week that would ban members of Congress, the president and vice president from buying or selling any prediction market bets, known as event contracts. 'Nobody has said to me, "we're making these bets," but I'm confident that they are,' Merkley said in an interview. 'I mean, we've got more than 400 members of the House. You've got 100 senators. You've got lots of staff. I'm sure many of them ... are making bets.'

Merkley called the current lack of guidance 'a massive blind spot.' 'Understandable, in that these event contracts didn't exist in this form at the time that we created disclosure on stock trading, but unforgivable if we don't fill in that blank now,' he said. University of Minnesota Law Professor Richard W. Painter, who served as President George W. Bush's top ethics lawyer, noted that while members must report earnings from event contracts, they may not have to disclose what they actually bet on.

What the Numbers Show

Billions of dollars are wagered each week on prediction markets. Two major platforms dominate the space: Kalshi, which is U.S.-regulated and requires users to identify themselves; and Polymarket, which is not fully regulated for use in the U.S., does not require identification and relies on cryptocurrency.

Financial disclosure instructions for the House, Senate and the White House make no mention of 'event contracts' or 'prediction markets.' There is no public guidance on how to report gains from these financial vehicles. By contrast, the House Ethics Committee issued guidance in 2018 stating that cryptocurrencies are 'subject to reporting' for members of Congress, their staffs and families. No such guidance exists for event contracts.

In February, Israeli authorities arrested and charged a civilian and a military reservist on suspicion of using classified information to place wagers on Polymarket. The CFTC issued new guidance in March asserting federal control over prediction market regulation, stating these markets have an 'obligation to list only contracts that are not readily susceptible to manipulation.'

The Bottom Line

The rapid growth of prediction markets has outpaced the ethics disclosure framework that governs members of Congress and White House officials. While two legislative proposals have emerged, both face uncertain prospects in a Congress that has struggled to advance even broadly popular stock trading bans. The CFTC maintains it has adequate oversight, but critics argue the agency hasn't prevented prediction markets from offering bets on elections and international conflicts. Until disclosure rules are updated, the public may have limited visibility into whether government officials or their staff are profiting from event contracts — even as millions of dollars continue to flow through these platforms.