Bipartisan Bill Proposes Curbing Congressional Involvement in Prediction Markets

(AsiaGameHub) –   The legislative effort in Washington to restrict prediction markets continues unabated, with lawmakers persistently seeking to impose limitations on these event contract exchanges.

A recent bipartisan legislative initiative, introduced by Representatives Adrian Smith (R-NE) and Nikki Budzinski (D-IL), aims to prevent members of Congress, high-ranking federal officials, and other designated government employees from engaging in trades on prediction markets linked to political occurrences and governmental decisions.

On March 25, Smith and Budzinski presented the bill, contributing another ethics-oriented proposal to the growing number of legislative efforts addressing prediction markets.

Designated as the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act, or the PREDICT Act, this legislation seeks to prevent public officials from leveraging their access to confidential information for individual financial benefit.

In the official statement announcing the proposed law, Representative Smith commented:

“Serving the American populace is an honor, not an avenue for financial gain. Our practical, bipartisan legislation will assure Americans that their elected officials’ choices are based on merit, rather than personal enrichment. I am pleased to collaborate with Representative Budzinski to guarantee that government personnel do not benefit from the confidential data entrusted to them.”

This bill comes after several prominent trades that accurately foresaw significant geopolitical developments, such as the combined U.S.-Israeli military actions against Iran and the U.S. military’s apprehension of former Venezuelan President Nicolás Maduro, thereby intensifying scrutiny on insider trading within prediction markets like Polymarket and Kalshi.

Budzinski emphasized these concerns in her remarks regarding the proposed law:

“Over recent months, there have been instances of obscure traders realizing substantial profits from events spanning from conflict with Iran to the duration of a government shutdown, prompting essential inquiries into the utilization of privileged information.”

The PREDICT Act’s Scope Extends Beyond Congressional Members

In its current form, the PREDICT Act would not be limited solely to members of Congress; its provisions would also encompass their spouses and dependent offspring, congressional employees, the president, the vice president, political appointees, specific high-ranking executive branch officials, and judicial members.

The legislation would prohibit these designated individuals from “engaging in any agreement, contract, or transaction that involves a purchase, sale, payment, or delivery contingent upon the occurrence, non-occurrence, or degree of occurrence of a particular political event.”

Unlike some congressional bills that lack explicit penalties for statutory breaches, this particular measure includes significant enforcement. It stipulates that offenders would incur a fine equivalent to 10% of the value of the forbidden trade and would be compelled to surrender any gains, with these funds directed to the U.S. Treasury. Furthermore, the bill mandates that ethics offices publicly disclose fines and their justifications on a public platform.

Nevertheless, the deterrent effect of any of these proposals remains uncertain, considering that comparable legislation, like the Stop Trading on Congressional Knowledge (STOCK) Act, enacted more than ten years ago, has yet to lead to any insider trading prosecutions.

Congress Continues to Focus on Prediction Markets

The PREDICT Act represents the newest entry in a rapidly expanding collection of federal initiatives aimed at regulating the event-contract sector. Below is an overview of other ongoing legislative efforts:

• Public Integrity in Financial Prediction Markets Act: This bill, introduced by Representative Ritchie Torres (D-NY) in early January, targets officials who engage in trading on government-related contracts while in possession of “material nonpublic information.”

• End Prediction Market Corruption Act: Senators Jeff Merkley (D-OR) and Amy Klobuchar (D-MN) put forward this bill on March 5, seeking to completely prohibit the president, vice president, and members of Congress from trading event contracts.

• DEATH BETS Act: Senator Adam Schiff (D-CA) introduced this legislation on March 11, which specifically aims to clarify a ban on contracts pertaining to war, assassinations, and individual fatalities.

• Prediction Markets Security and Integrity Act: This proposal, sponsored by Senators Richard Blumenthal (D-CT) and Andy Kim (D-NJ) on March 11, concentrates on safeguarding consumers, verifying age, and restoring regulatory power to individual states.

• Prediction Markets Are Gambling Act: Introduced on March 25 by Senators John Curtis and Schiff, this bill intends to prohibit CFTC-regulated platforms from offering sports-related or casino-style event contracts.

Considering the rapid progression of legislative efforts, it is evident that prediction markets are a focus for Congress. Nevertheless, with numerous bills currently under consideration, it remains uncertain which, if any, has a viable prospect of advancing.