Should Elected Officials Be Locked Out of Prediction Markets? New Bill Aims to Say Yes
Representative Ritchie Torres (D‑NY), backed by a bipartisan group of roughly 30 lawmakers including former House Speaker Nancy Pelosi (D‑CA), has unveiled legislation that would effectively bar government officials from taking part in prediction markets.
The proposal, titled the Public Integrity in Financial Prediction Markets Act of 2026, was introduced in the House on Friday. Its core objective is straightforward: to prevent people with privileged access to government information from betting on political, economic, or policy outcomes in markets that function similarly to trading platforms.
Under the bill, “covered officials” would include all federal elected officials, their staff, political appointees, and employees across the legislative and executive branches. That means members of the House and Senate, their aides, White House staff, and employees of federal agencies would be prohibited from trading in prediction contracts tied to events they could reasonably influence—or about which they may hold confidential information.
At the heart of the legislation is a concern that Washington insiders routinely obtain “material non‑public information” about upcoming decisions, regulations, investigations, and geopolitical developments. The bill argues that allowing those individuals to place wagers on outcomes that hinge on such information could amount to a new and largely unregulated form of insider trading.
Prediction markets, many of which now operate using crypto rails or tokenized contracts, let users buy and sell shares linked to the likelihood of specific events—such as who will win an election, whether a particular bill will pass, or if a government agency will take a certain regulatory action by a deadline. Prices of those contracts fluctuate as the crowd revises its expectations, often converging on probabilities that can be surprisingly accurate.
Supporters of the Torres bill say that what makes prediction markets powerful as forecasting tools is precisely what makes them dangerous when government insiders participate. If a senator, agency lawyer, or senior staffer knows in advance that a regulation is about to be issued—or that a major enforcement action is imminent—they can potentially profit by taking positions in markets linked to those decisions before the public becomes aware.
Existing ethics rules already attempt to curtail similar behavior in traditional securities markets. Members of Congress and many executive branch officials must file financial disclosures and are formally barred from trading based on non‑public information obtained through their official duties. Yet prediction markets occupy a gray zone: they do not involve traditional stocks or bonds, and in many cases, regulators are still wrestling with how to classify them—as securities, derivatives, gambling products, or something else entirely.
The new bill attempts to close that gap by treating prediction contracts, at least in the context of government ethics, as another class of financial instrument that federal insiders should not touch. Its backers argue that without such a restriction, public trust could further erode if it appears that those running the country are literally betting on the outcomes of their own decisions.
Critics of a blanket ban, however, are likely to raise several objections. One of the most common arguments in favor of prediction markets is that they aggregate dispersed information from thousands of participants, resulting in pricing signals that can outperform polls, pundits, or official forecasts. Prohibiting the very people most knowledgeable about government processes from participating, the argument goes, could diminish the information quality of those markets.
Some civil libertarians and market advocates may also frame the bill as an overreach that restricts the financial autonomy and speech rights of public officials. To them, placing a small wager on an election or economic data release is not categorically different from holding a diversified investment portfolio that might also be affected by policy changes, interest rate decisions, or geopolitical developments. If officials are trusted to own index funds that move with the market, why should they be flatly prohibited from holding a small position in a prediction contract?
Proponents of the legislation counter that prediction markets tied directly to political or regulatory events are much closer to betting on one’s own job performance or access to classified information than owning broad market ETFs. A staffer who learns that an agency will approve or reject a major corporate merger next week has a far clearer and more direct arbitrage opportunity in a binary prediction contract than through a basket of stocks whose price reaction may be diffuse and unpredictable.
Another layer of complexity is enforcement. Even if Congress passes the bill, regulators and ethics offices would have to determine how to monitor compliance in a world where many prediction markets are decentralized, pseudonymous, or based on blockchain smart contracts. While some platforms require identity verification, others do not, and sophisticated users can route trades through intermediaries or wallets that obscure ownership.
That raises the possibility that a ban might primarily impact officials who already follow the rules or use regulated platforms, while doing little to deter determined violators willing to exploit offshore or decentralized protocols. The bill’s supporters nonetheless argue that setting a clear legal and ethical standard is essential, even if enforcement is imperfect. Without such a standard, officials can always claim ambiguity.
The proposed legislation also opens a broader conversation about how prediction markets should interact with democratic institutions. Some researchers and technologists have suggested that governments ought to embrace these markets as tools to improve policy planning and risk assessment. Under that vision, rather than banning officials, regulators could sponsor or consult markets to get real‑time probability estimates of outcomes like inflation rates, election turnout, or the success of public health interventions.
Torres and his co‑sponsors take the opposite view: that while markets may have value as forecasting instruments, they become ethically fraught when those with power over the outcomes are allowed to gamble on them. In their framing, the integrity of public service requires drawing a bright line between private financial gain and public decision‑making in any domain, old or new.
There is also the political optics problem. Even if no law is broken and no insider information is technically used, the image of senators or agency chiefs betting on election results, regulatory approvals, or geopolitical crises could be deeply damaging. Voters might reasonably ask whether a policymaker is acting in the public interest or in accordance with a portfolio structured to benefit from specific scenarios.
One nuance that could emerge as the bill moves through committee is whether all prediction markets would be treated equally. While many contracts revolve around political events, others focus on relatively apolitical topics: the release date of a new technology, the winner of a sporting event, or the timing of a scientific breakthrough. Lawmakers may eventually face pressure to distinguish between markets that overlap with official duties and those that do not.
Another potential fault line is how far down the hierarchy the rules should reach. The current draft encompasses not just elected officials and cabinet‑level appointees, but also a broad swath of career civil servants. Some ethicists will argue that this scope is necessary, because material non‑public information can exist at many levels of the bureaucracy. Others may contend that a narrowly targeted ban on senior officials would be more realistic and less intrusive for rank‑and‑file employees with limited influence over policy.
The debate around this bill also highlights how crypto‑enabled markets are forcing lawmakers to revisit earlier assumptions about financial regulation. Traditional insider‑trading laws were crafted for stock exchanges and corporate disclosures. Now, prediction platforms can tokenize event outcomes and allow trading in minute increments from smartphones, across borders, and sometimes without intermediaries. For policymakers, the question is whether to adapt the ethics framework to this new reality or to attempt to cordon it off entirely.
Beyond the corridors of power, the outcome of this legislative effort will shape how prediction markets evolve in the United States. A strong signal that government officials must stay out could reassure skeptics who worry that the space is rife with conflicts of interest and manipulation. At the same time, it could also cement the perception that prediction markets are a kind of high‑tech casino from which public servants must be shielded, rather than a potentially legitimate part of the financial and information ecosystem.
Ultimately, the Torres bill forces a deeper question: where should society draw the line between informed speculation and unethical exploitation of inside knowledge?
For supporters of the ban, the answer is clear: if your job gives you special insight into how public decisions will unfold, you should not be able to turn that advantage into personal profit in any market that directly depends on those outcomes. For opponents, the challenge is to articulate how safeguards, disclosures, and existing insider‑trading laws might be enough—without resorting to a sweeping prohibition that treats every prediction contract as a potential ethics violation.
As the bill moves through the legislative process, expect hearings to probe these fault lines: the definition of “material non‑public information” in the context of event markets, the feasibility of enforcement in a decentralized trading environment, and whether a more tailored approach—such as limiting bets related to one’s own agency or committee jurisdiction—could offer a compromise.
Until Congress settles those questions, prediction markets will remain in a legal and ethical limbo, especially for those closest to the levers of power. The new proposal does not resolve the tension between innovation and integrity, but it squarely puts the issue on the national agenda: should the people who help decide the future be allowed to bet on it?