Prediction market firms face growing scrutiny as Congress weighs rules

The leader of the congressional committee that oversees how the House functions says he is working on legislation to not only ban current lawmakers from making prediction markets bets on elections and politics but that he wants to expand that to former federal lawmakers and candidates for those offices.

Rep. Bryan Steil, R-Wisc., who chairs the House administration committee, told reporters this week he doesn’t see an issue in lawmakers betting on nonpolitical events, like the outcome of sports games. But betting on elections and policies — topics where they could have access to insider information — would be banned on platforms such as Kalshi and Polymarket.

“There’s an avenue to make sure, now that these new and kind of novel markets are available to consumers writ large, that we put that in the rules explicitly,” he told reporters.

Kalshi and Polymarket officials, as well as some traders on the site, met with lawmakers this week as part of a larger effort to make their case about how Washington interacts with prediction markets. In addition to legislation to address insider trading risks, lawmakers are considering how to deal with prediction markets based outside the U.S.

While the Senate already changed its rules to ban senators and their staffers from placing bets on prediction markets, the House is looking to write a more tailored ban into law.

Although insider trading laws already exist, Steil said it’s become critical for lawmakers to avoid the appearance of using their elected office to personally profit.

Steil, who is working with House GOP leadership on his bill, plans to attach the language to legislation banning lawmakers from buying stocks. That bill advanced out of committee earlier this year but has yet to get a vote on the House floor despite promises from leadership that it would.

Steil said he also wants to see prediction markets that “are regulated in the United States, are under the values of the United States, and that we protect consumers from external transactions.”

Such a change could affect the largest prediction market, Polymarket, which currently bans U.S. users from its main exchange, although the company is working to get a legal foothold in the U.S.

The Commodity Futures Trading Commission regulates prediction markets and has argued in courts and public statements that it, rather than other federal agencies or states, should have exclusive regulatory authority over the industry.

Polymarket and Kalshi supported the Senate’s move to bar lawmakers from making bets. Kalshi has also flagged and fined political candidates who have used insider knowledge of their own races to make bets.

While Steil is planning to introduce his member-betting legislation soon, broader bills regulating the market could take longer to achieve. Those would be under the purview of either the House Agriculture Committee or the House Financial Services Committee.

While time is quickly running out for legislation this year, there’s interest among Democrats to put their own restrictions in place. When asked about the Senate’s rule change during a CNBC CEO Council Summit, Minority Leader Hakeem Jeffries, D-N.Y., said he thought the House “will do the same thing.”

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.