Congress is scrambling to regulate prediction markets

Members of Congress are rushing to institute new regulatory guardrails around online prediction markets following a series of alleged insider trading scandals.

Why it matters: As with cryptocurrency and artificial intelligence, this is proving to be yet another emerging tech policy area in which Congress finds itself struggling to stay ahead of the curve.

• More than a dozen bills have been introduced this year aimed at regulating betting markets, according to the Congressional Research Service. Not one has made meaningful progress towards becoming law.
• The latest is a bill from Rep. Ritchie Torres (D-N.Y.), first obtained by Axios, which would ban the use of campaign funds to bet on prediction markets.

Catch up quick: A $30,000 bet on the capture of former Venezuelan President Nicolas Maduro in January sparked a public furor around possible insider trading on prediction markets.

• Last month a U.S. soldier was charged with using classified information to profit by more than $400,000 from the bet.
• There have since been reports of political candidates, campaign staffers and others with access to material non-public information placing bets on markets that pertained to their line of work.
• Kalshi has taken its own steps to restrict such behavior, as have some government bodies including the U.S. Senate.

The latest: Torres, who has introduced other bills aimed at cracking down on illicit prediction market betting, is proposing criminal penalties including up to five years of imprisonment for using campaign funds to gamble on prediction markets.

• His new bill, the Campaign Funds Integrity Act of 2026, would have the Federal Election Commission devise guidance to enforce the ban and refer violators to the Department of Justice.
• There have been previous incidents of lawmakers using campaign funds to gamble by more traditional methods, but it is not clear if there has been an instance of them being used to make prediction market bets.

Zoom out: A growing cohort of lawmakers is seeking to advance prediction market legislation.

• One bill aims to prohibit prediction markets related to war or the deaths of specific individuals.
• Some bills go even further, with Rep. Jamie Raskin (D-Md.) and Sen. Jeff Merkley (D-Ore.) proposing a sweeping ban on prediction markets related to sports, politics and the military.

Yes, but: The Trump administration has largely resisted strict guardrails like these, lowering the chances of any major prediction market bill becoming law.