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Two US senators are pushing for legislation to prevent federal personnel from betting on prediction markets, following a surge in trading volume tied to geopolitical volatility in Iran.
The bill, introduced by Sen. Jeff Merkley, D-Ore., and co-sponsored by Sen. Amy Klobuchar, D-Minn., would prohibit members of Congress, the president, the vice president, and other high-ranking officials from buying or selling “event contracts” on prediction platforms.
Lawmakers argue the measure is necessary to prevent public officials from leveraging nonpublic information to profit from wagers on government policy, military strikes, or global diplomatic shifts.
A growing backlash against prediction markets
Prediction markets allow users to trade contracts based on the outcome of real-world events, ranging from election results to economic indicators. In recent years, platforms like Kalshi and Polymarket have moved into the financial mainstream, serving as both speculative hubs and real-time forecasting tools.
However, the rapid ascent of these markets has raised alarms in Washington, particularly regarding contracts involving sensitive national security operations.
The latest legislative push follows allegations that traders moved significant capital into contracts tied to US military actions in Iran. Analysts monitoring blockchain ledgers identified several wallets that placed large wagers shortly before strikes occurred, generating substantial returns. Critics contend the timing suggests that individuals with advanced knowledge of government maneuvers may be exploiting the markets.
Provisions of the proposed legislation
The End Prediction Market Corruption Act would codify the prohibition of event-contract trading for federal leadership. Under the proposal:
- Executive Branch: The president and vice president would be barred from participation.
- Legislative Branch: Members of Congress would be banned from trading event contracts.
- Senior Staff: Certain high-level executive branch officials would be subject to the same restrictions.
Violators would face civil penalties, including heavy fines and the forfeiture of all profits. The legislation also grants the US Attorney General the authority to initiate enforcement actions in federal court.
“Letting government employees bet on policy or military outcomes creates an obvious conflict of interest,” Merkley said in a Casino.org news post, noting the bill is vital to preserving public trust.
Geopolitical wagers on Iran fueled insider trading fears
The debate intensified after heavy trading activity centered on Iranian domestic politics and US military posture. High-volume contracts included wagers on the potential ousting of Iran’s supreme leader and the likelihood of US kinetic action.
Blockchain analysts report some traders netted hundreds of thousands of dollars from these specific outcomes. These incidents have fueled claims that insider knowledge is permeating decentralized and regulated exchanges alike. Lawmakers argue these scenarios illustrate the inherent risk of allowing those who influence—or are briefed on—global events to profit from their outcomes.
CFTC oversight and the legal future of event contracts
The Commodity Futures Trading Commission (CFTC) currently oversees most US-regulated platforms offering event contracts. While some platforms operate within this framework, others utilize decentralized protocols or offshore jurisdictions to bypass domestic oversight.
Regulated exchanges maintain they already enforce strict anti-insider trading policies and employ sophisticated monitoring systems to prevent market manipulation. However, skeptics argue these internal controls are insufficient as prediction markets grow in liquidity and influence.
Wisdom of the crowd vs. national security risks
The Merkley-Klobuchar bill is part of a wider national conversation regarding the ethics of “betting on the news.”
Proponents of prediction markets argue that “the wisdom of the crowd” provides more accurate forecasting than traditional polling or expert analysis. They point to the platforms’ successes in predicting election cycles and economic shifts. Conversely, detractors argue that markets tied to war, death, or national security are fundamentally “contrary to the public interest”—a standard the CFTC often cites.
While the bill faces an uphill battle in a divided Congress, its introduction signals a growing bipartisan appetite for regulating the intersection of sensitive government data and speculative finance.
