US Democrats Urge CFTC and Ethics Office to Warn Officials against Insider Trading on Prediction Markets

More than 40 Democratic members of the US Senate and House of Representatives sent a letter on March 30, 2026 to the Commodity Futures Trading Commission and the US Office of Government Ethics requesting that the agencies issue guidance reminding federal employees that insider trading in prediction markets violates existing law.

The request follows reports of suspicious trading patterns in event contracts related to military actions in Iran and Venezuela, the death of Iran’s Supreme Leader, and the length of White House press conferences, raising concerns that government officials may have used non-public information to profit from platforms including Polymarket and Kalshi.

Lawmakers Cite Existing Legal Framework Prohibiting Insider Trading in Derivatives

The letter, led by Senate Banking Committee Ranking Member Elizabeth Warren and Senate Agriculture Committee Ranking Member Cory Booker, argues that prediction market contracts fall under existing derivatives regulations and are therefore subject to the Commodities Exchange Act and the STOCK Act. Both laws prohibit federal employees from using non-public information obtained through their government positions to enter into futures contracts or similar types of trades.

The lawmakers requested that the CFTC and OGE circulate executive branch-wide guidance explaining that federal employees must refrain from insider trading in prediction markets. The letter noted that the CFTC has previously declared that contracts on platforms such as Polymarket and Kalshi are regulated derivatives, making the insider trading prohibition applicable.

Signatories included the top Democrats on the House Agriculture Committee and the House Financial Services Committee, Representatives Angie Craig and Maxine Waters, as well as senators Kirsten Gillibrand, Jeff Merkley, and John Hickenlooper. The agriculture committees in both chambers directly oversee the CFTC.

Suspicious Trading Patterns in Government and Military Event Contracts Prompt Scrutiny

The letter highlighted specific instances of potential insider trading that have emerged in recent weeks, including contracts related to military actions in Venezuela and Iran, the length of a speech from President Donald Trump’s press secretary, and the firing of former Department of Homeland Security Secretary Kristi Noem. Analysts have pointed to trading patterns in these contracts that appeared to anticipate government actions before they were publicly announced.

The capture of Nicolás Maduro and the death of Iran’s Supreme Leader Ali Khamenei were among the events where suspicious trading activity was identified. To date, no federal employee has faced federal charges related to insider trading on event-driven news in prediction markets.

The lawmakers stated that given the exponential growth in prediction market trading, rising evidence suggesting possible governmental insider trading, and potential confusion surrounding existing law in this area, formal guidance is necessary to remind federal employees of their legal obligations.

CFTC Developing New Prediction Market Policies amid Ongoing Investigations

CFTC Chairman Mike Selig has been working on a new set of policies to govern prediction markets, which are closely related to the crypto industry. The commission is currently seeking public feedback on potential regulations to address the rise of prediction market betting.

Federal prosecutors have reportedly spoken to prediction market firms about whether certain instances could trigger insider-trading cases. The CFTC has already conducted investigations into reports of insider trading on prediction markets, according to the letter’s inquiries.

White House spokesman Kush Desai stated that all federal employees are subject to government ethics guidelines that prohibit the use of non-public information for financial benefit. Desai added that any implication that administration officials are engaged in such activity without evidence is baseless and irresponsible reporting.

Warren stated that it is not fair for anyone, especially federal officials, to use inside information when betting on prediction markets, and that the CFTC should not allow public officials to rig prediction markets against working people.

Digital Asset Market Clarity Act Stalled amid Broader Crypto Regulatory Efforts

The lawmakers who signed the letter are also working on the Digital Asset Market Clarity Act, which has been stalled in the Senate. The legislation would provide a broader framework for digital asset regulation, including provisions relevant to prediction markets and their relationship to the crypto industry.

The letter requested that the CFTC and OGE provide information on whether the CFTC has already investigated reports of insider trading on prediction markets by federal employees and what steps the commission will take to ensure prediction markets are better detecting and preventing potential insider trading.

The request for guidance comes as the CFTC continues to develop its regulatory approach to prediction markets, which have grown significantly in trading volume and mainstream visibility over the past year.

FAQ

What did Democratic lawmakers request from the CFTC and OGE?

More than 40 Democratic members of Congress requested that the CFTC and Office of Government Ethics issue guidance reminding federal employees that insider trading in prediction markets is illegal under existing law. The guidance would clarify that the Commodities Exchange Act and STOCK Act prohibit government officials from using non-public information to trade on platforms such as Polymarket and Kalshi.

What incidents of potential insider trading prompted the letter?

The letter cited suspicious trading patterns in prediction market contracts related to military actions in Iran and Venezuela, the capture of Nicolás Maduro, the death of Iran’s Supreme Leader Ali Khamenei, the length of White House press conferences, and the firing of former DHS Secretary Kristi Noem. Analysts have suggested that some trades appeared to anticipate government actions before they were publicly announced.

What regulatory actions are currently underway regarding prediction markets?

CFTC Chairman Mike Selig is developing new policies to govern prediction markets, and the commission is seeking public feedback on potential regulations. Federal prosecutors have reportedly spoken to prediction market firms about possible insider-trading cases, and the CFTC has conducted investigations into reports of insider trading by federal employees.