Prediction Markets and Financial Regulation

Rep. Seth Moulton has ordered an office-wide ban on staff trading in prediction markets such as Kalshi and Polymarket, framing it as an ethics measure to prevent profiting from policy decisions and world events and saying a nearly $500,000 winning bet on Nicolás Maduro’s ouster helped spur him to co-sponsor legislation with Rep. Ritchie Torres to bar federally elected officials, political appointees and executive employees from such markets. The push for broader action comes amid related proposals from Rep. Jamie Raskin and Sen. Jeff Merkley to ban contracts on elections, government actions and sports, controversies like Kalshi’s refusal to pay roughly $54 million on an Ali Khamenei ouster contract, and CFTC Chair Michael Selig’s assertion that these platforms are federally regulated derivatives—highlighting federal–state regulatory friction.