WASHINGTON – Pressure is mounting in Congress to crack down on prediction markets, which have been at the center of national security scandals in recent months, with insiders accused of profiting from classified or sensitive information.
In June 2025, over a dozen accounts collected more than $600,000 by wagering on a surprise attack on Iran hours before it happened.
In April, federal prosecutors accused a soldier of using classified information to collect $400,000 on a bet the U.S. military would capture Venezuela’s leader. That same month, seven accounts made $1.4 million on bets that a U.S. ceasefire with Iran was hours away.
As concerns mount, some federal lawmakers are pushing to stiffen regulation of betting markets such as Polymarket and Kalshi. Proposals range from outright bans on bets related to military action to more aggressive insider trading prohibitions and expanded enforcement powers for regulators.
“Our classified military strikes should not provide an opportunity for bettors to play or profit,” Rep. Blake Moore, R-Utah, said on the House floor in March when he introduced a bill that would ban betting contracts related to election results, general government activities, war, assassination, terrorism, recreation events or illegal activity “contrary to the public interest.”
Attempts to pass new regulations this year face an uphill battle, though.
House Financial Services Committee Chairman French Hill, R-Ark., said during a May 20 forum hosted by Semafor that lawmakers lack a “basic understanding” of the current legal landscape. And he argued that existing regulations and regulators are sufficient.
Because Hill’s committee oversees agencies that regulate markets, his resistance carries outsized weight.
But Republicans only control the House by a single vote. The calculus could change quickly after the midterms. And lawmakers more interested than Hill in putting guardrails on national security-related bets are pushing ahead.
On June 10, the Commodity Futures Trading Commission, which regulates such markets, proposed new rules that would define – and likely ban – contracts that involve such events as war, assassination and terrorism. The rules would sidestep the need for congressional action.
“The Commission believes that event contracts that involve terrorism, assassination, or war present national‑security harms, extraordinary information leakage risks, and perverse incentive effects that overwhelm any potential informational utility,” the proposal states.
Prediction markets – online exchange platforms that allow participants to place wagers on whether a future event will occur – have boomed in the past year. Pew Research Center data show global monthly trading volume on the two leading platforms, Kalshi and Polymarket, ballooned to $23.8 billion in April from just $1.8 billion a year earlier.
Kalshi, Polymarket and the CFTC did not respond to requests for comment.
On March 24, the White House Management Office issued a memo warning staff not to place bets on prediction markets using nonpublic information, according to The Wall Street Journal, though administration officials asserted publicly that this was preemptive and they have no evidence of such betting.
An industry in the spotlight
Modern prediction markets have been around since 1988, according to the CFTC.
Primitive versions have existed since the early 16th century, and fears of manipulation and insider trading have dogged these markets from the outset. Wagering on papal elections was so widespread that in 1591, Pope Gregory XIV banned that pastime on threat of excommunication.
Such markets can have enormous value in harnessing the collective wisdom of the market to smoke out probabilities, as the CFTC announcement alluded to.
In 2003, the Defense Advanced Research Projects Agency proposed a prediction market that would take bets on intelligence questions such as the prospect of upheaval in the Middle East, to obtain more accurate information. The plan was scrapped over concerns that encouraging such wagers would financially incentivize terrorists, who could bet on attacks they then commit.
Flash forward to June 2025. According to The New York Times, 13 Polymarket accounts, many opened days prior or with a perfect win-loss record, made over $600,000 from wagers placed on the timing of Israel attacking Iran. When the bets were made, odds showed the attack was seen as unlikely.
On April 23, a federal grand jury in New York indicted Army Master Sgt. Gannon Ken Van Dyke on charges that included theft of confidential government information, of using such information for personal gain, and commodities fraud. He pleaded not guilty.
According to prosecutors, Van Dyke used Polymarket to bet on the capture of Venezuelan President Nicolás Maduro. Van Dyke worked with U.S. Army Special Forces at the time and was involved in the planning and execution of the mission.
Maduro was captured on Jan. 3 in Caracas, in what federal officials called a law enforcement operation. The deposed president is now in jail in New York awaiting trial on drug trafficking charges.
In an unrelated case, seven Polymarket accounts made over $1.4 million by betting on when the U.S. would reach a cease-fire agreement with Iran in April. President Donald Trump announced the ceasefire on April 7 – just hours after the wagers were made.
Federal authorities are reportedly investigating whether former Rep. George Santos engaged in insider trading. With bettors on Kalshi predicting that he would skip Trump’s February State of the Union address, Santos posted that he would be there – but ended up not attending and, possibly, profiting by driving up the odds and betting on an outcome he alone controlled.
Growing scrutiny
On May 22, Rep. James Comer, R-Ky., chair of the House Oversight and Government Reform Committee, issued letters to Kalshi and Polymarket demanding documents and communications about their Know Your Customer verification policies, procedures for detecting suspicious trading activity and bets pertaining to military action in Iran and Venezuela.
“This growing pattern of insider trading activity on prediction market platforms indicates that Congressional action may be necessary,” Comer wrote.
Concern over prediction markets has risen alongside worries that the CFTC has been overly friendly to the companies it oversees.
Sen. Tim Kaine, D-Va., was skeptical of the agency’s current ability to regulate the industry.
“It does not seem like a core competence,” he said in a recent interview.
A partnership between Kalshi and CNN, announced in December 2025, drew the ire of Rep. Abe Hamadeh, R-Scottsdale. Hamadeh argued the partnership could allow CNN to profit by manipulating geopolitical events with its coverage, and demanded the CFTC answer questions about its review of the arrangement.
Federal law already bans insider trading with information that must remain private, like classified mission plans – hence the indictment of Van Dyke. And while the CFTC has statutory authority to ban wagers related to war, assassination and terrorism, the agency’s practice has been permissive so far.
Members of Congress are trying to close loopholes and fill in enforcement gaps they say compromise national security.
That includes the fact that Polymarket is easily accessed through its popular international platform, which would allow bettors to ignore U.S. regulations on war-related events.
The proposed CFTC rules would restrict event contracts that could be fulfilled through war, terrorism or assassination.
Such bets are readily available currently. On Kalshi, users had $126,746 pending bets as of June 8 on whether the U.S. will take control of any part of Canada by the next presidential inauguration in 2029. The platform’s probability calculation puts the chances of that at 12%, so a $1,000 wager would net a $7,693 payout.
Polymarket users, meanwhile, have bet $3.7 million on whether the U.S. will attack Cuba by the end of 2026. That probability is calculated at 39%, so a $1,000 wager would pay $2,500.
New rules
Members of Congress have introduced multiple bills this year to give the CFTC more instruction or sidestep it entirely. They’ve also worked to prevent insider betting within their own ranks and by all federal employees.
“Underregulated prediction markets have exposed America to needless public safety and national security risks by allowing traders to invest in outcomes related to sensitive matters like terrorism, assassination, war or elections,” Moore said when he introduced his Event Contract Enforcement Act.
That’s one of several pending bills that would ban contracts in categories like war and terrorism, regardless of whether the CFTC exercises its discretion to do so.
A bill from Sen. Chris Murphy, D-Conn., and Rep. Greg Casar, D-Texas, called the BETS OFF Act, would prohibit wagers on events with an outcome controlled by a government official or entity, including war, assassination and terrorism.
Sen. David McCormick, R-Pa., has sponsored the Prediction Market Act, which would ban any bet that “materially encourages violence or similar unlawful activity.”
Restrictions targeting wagers by government officials and members of the Armed Forces have also been proposed.
Some bills seek to eliminate avenues for using nonpublic knowledge of forthcoming military action. Others would impose fines on anyone found to have placed bets on such matters.
One draft of this year’s National Defense Authorization Act released by the House Armed Services Committee would direct Defense Secretary Pete Hegseth to ban the use of prediction markets by civilian and uniformed personnel with access to nonpublic information.
Betting from the inside
The platforms have been quick to denounce insider trading.
Kalshi has sought to distance itself from offshore competitors – that is, Polymarket. Its website boasts full Know Your Customer procedures, regulatory oversight, cooperation with law enforcement and constant trade surveillance and draws a contrast with “unregulated platforms.”
The Wall Street Journal reported on June 9 that Kalshi plans to require bettors on sensitive markets, including those related to national security, to disclose their employers.
Shayne Coplan, the founder and CEO of Polymarket, has touted the company’s cooperation with authorities to investigate insider trading cases. Neal Kumar, Polymarket’s chief legal officer, told ABC News in May that the platform had referred nearly 100 cases to U.S. law enforcement, including Van Dyke’s.
But in October 2025, months before Van Dyke was indicted, Coplan seemed to defend the use of insider information regarding the spike in bets over Maduro’s future.
“If you are into geopolitics, this creates an incentive for you to dig in to what’s going on in Venezuela and try and get an edge,” he told CBS’ “60 Minutes.”
“People going and having an edge to the market is a good thing,” he said. “Obviously, you need to curate them and you need to be really clear and stringent on where the line is drawn and ethics, and we spend a lot of time on that. But it’s sort of an inevitability that this will happen, and there’s a lot of benefits from it.”
Robin Hanson, an economics professor at George Mason University who helped come up with the idea for DARPA’s 2003 prediction market proposal – dubbed a “terror casino” by detractors – opposes restrictions on national security related bets.
Such contracts could reveal impending threats and provide lifesaving insights, he said.
“We should have markets on important topics, just like we should allow journalists to write articles on important topics,” he said.
The Department of Defense did not respond to requests for comment about existing safeguards or its stance on proposals to tighten rules.
Murphy, among other Democrats, expressed worry about people in the Trump administration trying to profit from defense decisions.
“We don’t want people inside the Situation Room who have money to gain off of a particular national security call,” he said. “The only thing that should matter is the security of the nation.”
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