- Prediction markets have already been the subject of scrutiny in recent months.
- The Iran war is only adding more pressure.
- There's now a bill to ban the president, VP, and members of Congress from event contract trading.
Prediction markets like Kalshi and Polymarket were already dealing with growing skepticism in DC after the Venezuela raid.
Then came the war in Iran.
Over the past week, lawmakers on Capitol Hill have seized on activity on prediction market platforms to make the case that prediction markets need to be reined in, including via new legislation.
"Nobody should be making bets on if the United States is going to war, or what words President Trump is going to use in his speech," Democratic Sen. Chris Murphy of Connecticut told reporters this week. "Those are fundamentally corrupt markets, because there are people on the inside who know the answer, and it perverts the decision-making process."
It may not amount to much in the near term, given GOP control of Washington and the Trump administration's friendly regulatory approach toward prediction markets.
Still, there are signs of a growing backlash toward some of these markets — and signs that prediction market companies are taking it seriously.
Earlier this week, following online outcry, Polymarket took down a market that allowed users to trade on whether a nuclear weapon would detonate this year.
Two new bills on prediction markets
In the wake of the Iran strikes, some in Congress want to ban top federal politicians from trading on sites like Polymarket and Kalshi entirely.
The "End Prediction Market Corruption Act," a bill introduced on Thursday by Democratic Sens. Jeff Merkeley of Oregon and Amy Klobuchar of Minnesota, would ban the president, vice president, and members of Congress from trading on prediction market platforms altogether.
That's a broader effort than the bill introduced by Democratic Rep. Ritchie Torres of New York in January that would ban government officials from making trades when they may have influence or inside information on a forthcoming decision.
And Murphy, a staunch critic of prediction markets, told reporters this week that he's planning to introduce a bill to ban prediction market trading on certain government actions.
The Connecticut Democrat specifically named markets tied to war and so-called "mention markets" in which users can trade on whether public figures, including politicians, will say particular words during public appearances.
Kalshi, a US-regulated prediction market, already does not allow betting on war or death. In fact, that prohibition led to a separate controversy, with some users growing enraged after the company did not count the death of Iranian Supreme Leader Ali Khamenei as the leader being "out" in a market about his political future.
Polymarket, on the other hand, has not yet launched its US market and is operating offshore, though American users have been able to use the site via VPNs.
A spokesperson for Kalshi told Business Insider in a statement that the company has been in talks with "policymakers from both sides of the aisle about work they're doing to ensure market integrity," including Merkley.
"We support Congress and regulators taking action to police insider trading, and keep prediction markets onshore and under federal regulation," the spokesperson said.
Polymarket did not respond to a request for comment.
Don't hold your breath for congressional action
If you had to wager on Congress doing anything on prediction markets in the near term, you're better off betting no, despite the growing scrutiny.
Most of the legislative energy around prediction markets is coming from Democrats, who are largely locked out of power in Washington for now.
Republicans have generally taken a friendlier approach toward the markets, including the current chairman of the Commodity Futures Trading Commission, which oversees the companies.
Republican Sen. John Boozman of Arkansas, the chairman of the Senate committee that oversees the CFTC, said there were "some incidents that need to be looked at" by the commission, referring to suspicious trade.
But he said he didn't see a need for the heads of prediction market companies to testify before Congress anytime soon. "Right now, we're waiting to see what the CFTC does," Boozman said.
And for plenty of other lawmakers, prediction markets just haven't caught their attention.
"I think there's a lot of these things that we've got to kind of keep an eye on and take a look at," Republican Rep. Chip Roy of Texas told Business Insider. "But honestly, I haven't thought through it all."
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