 |
By The RepresentUs Team August 31, 2026 |
Ready to do more?
Tell Congress: Politicians, their families, senior staff and appointees should not be able to trade on prediction markets tied to political events and policy decisions.
What is a prediction market?
Prediction markets are betting sites where you can make money predicting what will happen: who will win an election, whether the stock market will go up, even when military operations will occur. Sounds harmless? Here's the problem: people with inside information can place bets they know will win. That includes government officials with access to secret information and even the power to make sure they win.
What is insider trading and how can we prevent it?
Imagine you work for the military and learn that the U.S. is about to launch a secret operation. You could bet money on that operation happening and win big. That's insider trading. It's illegal in the stock market. It should be illegal here too.
U.S. soldier Gannon Ken Van Dyke allegedly used classified information about a military operation in Venezuela in January 2026 to make over $400,000 in bets on Polymarket, a popular prediction market. He got caught. The Department of Justice charged him. But here's what should worry lawmakers: thousands of other people could do the same thing without getting caught. Prediction markets create an opportunity for insiders to profit unfairly and drive a host of unintended consequences.
Why is cryptocurrency in prediction markets a problem?
Cryptocurrency wallets protect anonymity and trades on prediction markets. Users can bet with cryptocurrency wallets that don't require names or identification. This secrecy is a gift to corrupt insiders.
In February 2025, the US government changed its policy position and decided to allow political event contracts in prediction markets. That has led to an explosion in betting on political events, with political events driving as much as 36% of trading volume on Polymarket.
A new report by the Anti-Corruption Data Collective (ACDC) found that 152 anonymous accounts won $8 million betting on military and defense markets—suspiciously high profits that suggest insider trading. When insiders trade on secrets, they could leak military secrets to bad actors, put soldiers’ lives at risk, create opportunities for organized crime and money laundering, and build a shadow network where government workers trade favors using classified information.
What can be done to stop insider trading and crime on prediction markets?
The U.S. government has made proposals to ban bets on war, assassination, and "death markets." Several state regulators also argue these platforms act as illegal gambling sites and have filed lawsuits or bans against specific event contracts. Polymarket and other prediction markets claim they're legal derivatives — a financial product, not gambling — and under that definition they are regulated by the Commodities and Futures Trading Commission (CFTC) not the Securities and Exchange Commission (SEC) which manages actual stocks and securities trade. Yet the CFTC was originally meant to regulate commercial commodities like grains and livestock, not event contracts.
This means prediction markets are operating in a legal grey zone and often they're beyond U.S. regulators' reach because they operate globally and anonymously. That makes enforcement nearly impossible.
Congress is working on the PREDICT Act to stop US government officials from insider trading on these markets. That's a start. But real protection requires:
- Ban anonymous trades. Require users to verify their identity.
- Apply real rules. Make prediction markets follow the same anti-fraud standards as stock exchanges.
- Close the loopholes. Stop platforms from hiding behind claims that they're "global", “offshore,” and "unregulated."
- Conduct effective enforcement. Ensure the agencies charged with overseeing prediction markets prioritize enforcement, not just deregulation.
Without these changes, prediction markets will remain a tool for corruption and crime, a place where government officials cash in on secrets — or worse, make decisions to ensure they win a bet — while ordinary Americans have no idea what's happening.