Prediction Market Ethics Bill Picks Up Key Democratic Backers

A bipartisan group of House Democrats introduced legislation this week aimed at blocking federal officials from participating in prediction markets — a move driven by recent high-profile wagers that critics say mirror insider trading patterns seen in traditional financial markets.

Good to Know

• A bill now before Congress would bar federal officials from using nonpublic information for prediction market trades.
• The move follows scrutiny over a $400,000 payout tied to a Polymarket wager.
• Former House Speaker Nancy Pelosi, often accused of benefiting from market timing herself, is a lead sponsor.

Prediction Market Legislation Takes Shape

The Public Integrity in Financial Prediction Markets Act of 2026 was unveiled this week by Ritchie Torres of New York, with support from a group of House Democrats including Nancy Pelosi.

If enacted, the measure would bar federal elected officials, political appointees, executive branch employees, and congressional staffers from buying, selling, or otherwise trading prediction market contracts tied to government policy, government action, or political outcomes when they hold or could reasonably obtain material nonpublic information through their official roles.

Supporters say the change creates clearer ethical boundaries akin to insider-trading rules in traditional securities markets.

What Sparked the Push

The effort gained traction after a widely publicized wager on the prediction platform Polymarket paid out roughly $400,000 after a trader correctly bet on Venezuelan President Nicolás Maduro’s ouster. Critics raised questions about whether that trade was timed with privileged insight into imminent U.S. actions — and whether federal officials with access to similar inside information could exploit prediction markets before the public.

Torres said the intersection of government service and prediction market bets poses “demonstrated dangers” and could erode trust if left unchecked.

Backers and Platform Voices

Not all market operators view the bill the same way, but some have been vocal. Kalshi CEO Tarek Mansour has publicly voiced support for the legislation, pointing out that his platform already enforces insider-trading prohibitions, while other markets lack strict safeguards.

Proponents, including U.S. Senator Chris Murphy, argue Washington insiders should not be able to trade on information that is not publicly available — a principle borrowed from longstanding rules in securities law.

Pelosi’s Role and Public Perception

It’s especially interesting that Nancy Pelosi is a lead sponsor of this bill, given the long-running public debate over her own financial activity. Critics often dispute how Pelosi and her family have generated substantial trading profits — sometimes hundreds of millions — while serving in Congress, especially given that members of Congress earn only their government salaries.

Pelosi’s investment record has drawn ongoing scrutiny. For decades, she and her husband have reported significant gains from stock trades and portfolio growth, with estimates of at least tens of millions in profits over her career. Those gains have led to calls for broader restrictions on trading by lawmakers, including proposals like the PELOSI Act aimed at limiting members of Congress and their families from profiting from market moves potentially tied to information not yet available to the public.

Pelosi has denied involvement in individual trades, and her office says her husband conducts investment decisions independently. Still, her public image on market practices remains a focal point in the broader debate about ethical constraints for policymakers.

Worries and Critique

Opponents of the restrictions worry that overly broad limits could chill beneficial information flows or deter useful signals that prediction markets can provide. But lawmakers pushing the bill argue that when federal officials profit from outcomes tied to political developments or policy decisions, public trust suffers.

Policymakers on both sides of the aisle have wrestled with how to balance innovation in financial technology with traditional ethical boundaries, and this legislation is seen as a first step in addressing gaps in current oversight.