Effort comes after reports of individuals suspiciously earning massive payouts before Iran Strikes, Venezuela Military Actions Washington, D.C. – Today, Oregon’s U.S. Senator Jeff Merkley and…
Effort comes after reports of individuals suspiciously earning massive payouts before Iran Strikes, Venezuela Military Actions
Washington, D.C. – Today, Oregon’s U.S. Senator Jeff Merkley and Minnesota’s U.S. Senator Amy Klobuchar launched a new effort to prevent government officials at the highest levels from engaging in prediction markets, cracking down on the potential for any insider trading.
Following multiple public reports on the growing influence of prediction markets and their potential for corruption, Merkley and Klobuchar introduced the End Prediction Market Corruption Act—a new bill to ban the President, Vice President, Members of Congress, and other public officials from trading event contracts. The bill will ensure that federal elected officials maintain their oath of office to serve the people by preventing them from trading on information that they gained through their role.
“When public officials use non-public information to win a bet, you have the perfect recipe to undermine the public’s belief that government officials are working for the public good, not for their own personal profits,” said Merkley. “Perfectly timed bets on prediction markets have the unmistakable stench of corruption. To protect the public interest, Congress must step up and pass my End Prediction Market Corruption Act to crack down on this bad bet for democracy.”
“At the same time that prediction markets have seen huge growth, we have seen increasing reports of misconduct. This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors and provides rules of the road to prevent those with confidential government or policy information from exploiting their access for financial gain,” said Klobuchar.
Merkley and Klobuchar’s End Prediction Market Corruption Act is cosponsored by U.S. Senators Chris Van Hollen (D-MD), Adam Schiff (D-CA), and Kirsten Gillibrand (D-NY).
Their bill is supported by Public Citizen, Citizens for Responsibility and Ethics in Washington (CREW), and Project On Government Oversight (POGO).
“The American people deserve unwavering ethical standards from their government officials. Officials have a responsibility to avoid not only actual conflicts of interest but even the appearance of impropriety. POGO is pleased to endorse the End Prediction Market Corruption Act, which will further prohibit covered government officials from exploiting nonpublic information for personal gain in prediction markets,” said Janice Luong, Policy Associate for the Project On Government Oversight (POGO).
“It is now more important than ever that prediction markets be governed by ethical constraints, especially when it comes to bets placed by governmental officials. Sen. Merkley’s legislation would appropriately prohibit key government officials from buying or selling on the prediction markets contracts in which they could have insider information on changes in the market. Public Citizen heartily endorses this bill,” said Craig Holman, Ph.D., Public Citizen.
“The rapid rise of retail prediction markets creates the risk that officials across the government could use nonpublic information to trade on and profit off event contracts,” said Debra Perlin, Vice President of Policy of Citizens for Responsibility and Ethics in Washington (CREW). “The American people must be able to trust that their government officials are working on their behalf rather than for personal gain. Senator Merkley’s legislation represents a vital step forward to ensure that those in positions of power, including senior executive branch officials and members of Congress, cannot abuse their access to nonpublic information in order to profit.”
Merkley has been a long-time leader in the push to end public corruption. He has led the charge to crack down on election gambling and dark money in politics, prevent lawmakers from trading stocks, and ban cryptocurrency-related corruption by elected officials at the highest levels of the federal government.
Full text of the End Prediction Market Corruption Act can be found by clicking here.
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Comments
Unfortunately, it's not just elected officials that are problematic for prediction markets. The Secretary of War, for instance is not an elected official nor are leaders of the armed forces and there is definitely a prediction market for war. Multiply this by every powerful appointee and every career bureaucrat and see what kind of picture that paints.
If we're not going to ban prediction markets, we could at least make it a requirement that all bets are public and associated with a real identity.
That'd go a long way towards curbing the corruption of these things, while preserving (or even greatly enhancing) their "predictive power."
By noosphr 2026-03-081:32 Sounds like a lot of second cousins are going to make amazing predictions.
THIS — make it transparent, not try to ban it.
And the transparency must be real-time and MUST include the full dox on beneficial owner of the contract/bet, with steep jailtime for falsification/fronting, etc.. They can even say it is for tax purposes — they win that bet, they should pay income tax (and be able to deduct the costs of their losing bets against that specific income type).
I want to know if a bunch of senators or DOD personnel bet on event X, and I want journalists and OSINT watchers to know it in realtime. That gives everyone information while naturally eliminating most of the advantage of insider trading, since nearly everyone will pile into the same trade and the odds/payoff will come closer to the reality.
Knowing who is making the bets doesn’t prevent mildly corrupt officials from driving the outcome that’s going to win them some cash.
Knowing that high-level DOD official were betting on us invading Iran does us no good if the only reason we invaded Iran was so they could win their long-odds bet. Sure, we can try and shame them, but now they're rich and we're fighting another middle-east war.
What is the current method that exists which stops CEO/executives from short selling their own company's stock, then driving that company's value down (which is easy to accomplish)?
Why can't that same method be used to prevent or indict gov't insiders who tries to do the same?
By toss1 2026-03-0815:33 That same method is the SEC (Securities Exchange Commission) and is it widely regarded as simultaneously ineffective and heavy-handedly overreaching.
It is an inherently hard problem to identify insider trading when trading securities, or in this case, bets/contracts, doesn't have participant identification and transparency problems
The same solution would be best for both — everyone can trade freely with the sole caveat that all ultimately beneficial owners are fully identified and the trades are transparently published in real-time.
Braying about "free market" when in the actual market players can hide their identities and covertly manipulate it, while having an underfunded agency supposedly tracking them down after the fact, is just a farce.
A solution structured so it naturally and dynamically self-corrects is far better than an enforcement bolted-on after the fact. And yes, there would still be enforcement of requiring transparency to enforce proper identification.
By jmye 2026-03-084:40 > Knowing that high-level DOD official were betting on us invading Iran does us no good if the only reason we invaded Iran was so they could win their long-odds bet.
Of course it does, if we’re willing to do ever-so-slightly more than jerk off on TikTok about it.
By malfist 2026-03-081:28 I guess we shouldn't do this then. If it doesn't completely solve to problem.
By chromic04850 2026-03-084:20 [dead]
Seems like you’d get a secondary proxy market popping up overnight. Like domain privacy for degenerates.
That's why you make the regulations like AML regulations, where it's a crime to obfuscate the source of the wager too.
By gzread 2026-03-0813:13 One of the worst regulations in existence, and you want more of it?
By MadnessASAP 2026-03-080:241 reply Its not transparent to me? What are they trying to do?
By rangestransform 2026-03-084:091 reply Deputize prediction market providers to force people to self incriminate à la KYC/AML laws today
> self incriminate
well, if they weren't doing something that would've otherwise been deemed illegal, then why would they consider it self-incriminating to have to follow KYC/AML rules?
By ministryofwarp 2026-03-089:151 reply If you haven't broken the law, why would you be willing to come down to the jail and breakfast in a cell each morning?
only if you equate following a set of rules to being in jail.
Do you follow road rules? Why don't you apply that jail analogy to that?
By ministryofwarp 2026-03-0814:48 You sound like a helpful world citizen. The other problem the US has is that it is illegal for a US Citizen to pay a bribe but there's no realistic enforcement. Luckily you can help solve this. Whenever and wherever you travel you can keep some forms with you and every time you are pulled over you can fill them out with the police in quadruplicate so that each of you can mail them to Washington. At some later point the US can try to cross reference and determine who didn't mail theirs and then whether anyone was actually under US jurisdiction during the incident.
By rangestransform 2026-03-0814:12 The right to a fair trial fundamentally requires the government to do 100% of the job of proving you guilty, and it shouldn’t force you to generate evidence against yourself while going about perfectly legal things
By hephaes7us 2026-03-080:221 reply Domain privacy isn't for degenerates.
By reverius42 2026-03-081:14 They didn't say it was?
By wwweston 2026-03-083:25 There’s no one in the world that creating an alternate “real” identity would be easier for than someone who can influence or even determine military or covert actions. It’s probably even legal for them to do so.
By Esophagus4 2026-03-0812:36 I’m not sure I agree - look at the crypto crime that happens as hackers breach databases and are able to link crypto holdings with human identities to target them.
Public trades will make people targets and that will create weird incentives.
https://apnews.com/article/crypto-bitcoin-kidnapping-wrench-...
By thrance 2026-03-0810:30 I doubt that would change anything, in this era of shamelessness. Being corrupt has become a virtue, and winning lots of money is cool, doesn't matter if it was from gambling on war with insider trading.
I believe prediction markets and sports betting apps are societal failures that only serve to alienate the masses and further extract wealth to the top. Let's ban them all, we're not losing anything.
By samlinnfer 2026-03-080:041 reply And maybe you can start by mandating age verification?
By CrossVR 2026-03-081:36 It's always a good idea to disguise your identity collection as "age verification".
By mr_00ff00 2026-03-083:20 We already do this with Congress, and there’s still insider trading
By __MatrixMan__ 2026-03-083:29 Another step would be to find ways to discourage bets on outcomes that the bettors participate in.
By magpi3 2026-03-080:40 The bill also prevents senior government officials from betting on prediction markets if they are participating personally in the event on which they are betting.
https://www.merkley.senate.gov/wp-content/uploads/End-Predic...
It's also low-ranking members of the armed forces that have a lot more information than you'd expect. If you just banned the high ranking members from prediction markets, I actually don't think very much would change. (There would just be slightly more delay.)
By hunter-gatherer 2026-03-082:25 Very few armed forces members have enough information to make actual meaningful trades. The low ranking ones do not have enough money to make meaningful trades even if they did.
By JumpCrisscross 2026-03-086:14 > if you just banned the high ranking members from prediction markets, I actually don't think very much would change
Good behavior starts at the top. It becomes a lot easier to crack down on low-level corruption if the guys at the top aren't doing it.
If I was a NOAA meteorologist I'd be making bank insider trading temperature prediction markets.
Maybe this could be an alternative funding source for weather prediction, haha.
By rangestransform 2026-03-084:111 reply How can prediction markets be priced with continuous instead of discrete predictions?
By gzread 2026-03-0813:15 They usually divide into buckets
By Esophagus4 2026-03-0812:112 reply But wouldn’t that be a feature of the prediction market, not a bug?
If someone really smart knows what will happen, that will make the market’s predictive ability more accurate.
By ralph84 2026-03-123:02 The meteorologist making the observation has the ability to sway the outcome. "Those automated observations were wrong, turns out the maximum temperature today was 61F not 60F." This already happens all the time. Whether insiders are doing this to win in prediction markets is up for debate.
That's always been a just-so story invented to justify insider trading. If weather predictors always bet on a weather prediction market, why would anyone else? They'd be guaranteed to lose money.
By Esophagus4 2026-03-0816:52 1) Not all expert weather predictors agree. They can bet against each other.
2) retail traders lose money and know far less than institutional investors, but do retail traders participate in the stock market? Of course they do.
By chromic04850 2026-03-084:21 [dead]
> The Secretary of War
There's no such position. You may be referring to the Secretary of Defense.
It’s a secondary title [1].
By jghn 2026-03-083:01 POTUS also does not have the authority to rename the department, so not sure that this EO is meaningful.
By cyanydeez 2026-03-0722:47 I mean, North Korea has some very deadly incentives if this whole "buy your prediction" market is brought online.
By tclancy 2026-03-082:57 They do what they can. It won’t matter. But the point at this point is to call out the grift. To make plain for at least the rest of you outside our borders that America died of grifters squeezing dollars out of some weird machine that we couldn’t or wouldn’t shut off.
This machine kills hope.
By Animats 2026-03-0723:06 Congress was not even notified in advance of the wars on Iraq or Venezuela. Any leaks came from the executive branch.
By treetalker 2026-03-0721:591 reply Don't forget relatives, useful idiots, and billionaire special envoys!
By 9dev 2026-03-0722:38 The latter two groups often overlap, even
By brucehoult 2026-03-081:536 reply Making insider/true expert information public more quickly in the form of influencing prices in a toy market is THE ENTIRE POINT of prediction markets.
Read the original papers on them.
http://li.mit.edu/Stuff/CNSE/Paper/Hanson90.pdf
It might've been the original purpose but in practice prediction markets have turned into a tool for gambling.
It also creates weird incentives. If I want to pay a politician to do something, bribing them would generally be illegal. But what if I instead bet lots of money that they won't do it?
> a tool for gambling
they require liquidity from people that are not in the know for adequate price discovery and exit liquidity worthwhile for participation
You need liquidity but there is no requirement that it comes from gamblers
By NiloCK 2026-03-083:55 This may be the purpose of a prediction market for an outside observer. But the outside observer and the US government (or any org that holds private information) have different purposes - it's an adversarial mechanism.
In particular: the government is free to just publish any insider/true information that it wants the public to know about. If it shared that purpose then the market wouldn't need to exist.
By derektank 2026-03-081:58 True experts need not be the people with the ultimate ability to effect change. Professional sports organizations ban their players from betting on games because it creates bad incentives to throw a winnable game. Banning elected representatives from gambling on prediction markets doesn’t make it impossible for insider information to surface, but it does prevent the governance equivalent of match fixing.
EXACTLY! We want insiders to participate in prediction markets and profit!
By yieldcrv 2026-03-083:12 profit is the participation incentive
By JumpCrisscross 2026-03-086:13 > Making insider/true expert information public more quickly in the form of influencing prices in a toy market is THE ENTIRE POINT of prediction markets
American taxpayers pay a lot of money for a military and intelligence advantage. It's not clear it's in our interest for that knowledge to be made "public more quickly."
By Esophagus4 2026-03-0812:15 Exactly.
What we don’t want, and what we should enforce, is participants in prediction markets influencing the events they’re betting on (like the recent basketball betting scandal).
I recall a few finance papers saying (paraphrasing) "approximately all private info is reflected in stock prices". The same is obviously true of prediction markets. If government officials are banned, they'll just give a little wink to a relative or friend, and the prediction markets will reflect the private information.
On a personal note, I find these markets incredibly useful in day to day life. There's been a joke for a while that putting site:reddit.com in your google search is the only way to get (some) real information. It's becoming true that putting <search terms> AND (kalshi OR polymarket) is how to get accurate info.
By pottertheotter 2026-03-080:451 reply I think you're thinking of the efficient-market hypothesis. The hypothesis is that prices reflect all available information, and "available information" is the key part. The "strong form" includes private information, but research has not found support for this. And even the "semi-strong form" falls apart. For instance, the market for small cap stocks is not as efficient as the market for large cap stocks.
You need a market that has enough people paying attention and doing the work, and you also need a market that has enough liquidity.
Source: I have a PhD in capital markets.
By mlrtime 2026-03-0810:39 >Source: I have a PhD in capital markets.
Sort of on-topic Q for you: What is your general take on HN discussion on finance markets/technology. They don't come up often, but when they do, I find a majority of the comments show that people have very limited understanding of traditional capital markets (non VC).
I don't have a PhD but have worked in the industry for 20+ years mostly in trading technology across fixed income and equities.
Accurate info on what? Most markets have almost no liquidity, outside of sports and crypto
By nomilk 2026-03-0722:47 Political outcomes is the biggest. Businesses (and individuals) can be strongly (financially) affected by who's elected. I'd been very curious in the past about political outcomes but had never used prediction markets, so I built a little tracker that inputed the probabilities based on scraping ~14 betting sites. I had to do it on a market-by-market basis, and there were lots of edgecases. Having them all in one place (or two; kalshi and polymarket) makes life much simpler.
Prediction markets have also directly affected my travel planning, helping me avoid a country that wasn't at war at the time but had (in my judgement) a too-high risk of war.
You're completely right about thinly traded markets; those are way, way less accurate. But they also offer the greatest opportunity for someone to bet the other way, which has the effect of 'correcting' the market.
By zaik 2026-03-0722:45 Elections usually also have good liquidity.
By Esophagus4 2026-03-0812:21 I’m still calibrating my expectations on the accuracy of Polymarket.
For example, I’m guessing more liquidity in a market means a signal is more predictive. But how much volume is enough to make a signal reliable? What’s the scale? Is $100k unreliable and $100m really good?
Are there other factors that impact a signal’s predictive strength?
By BSVogler 2026-03-0722:44
