Polymarket & Kalshi Ban Insider Trading After Senator Criticism
WASHINGTON (TNND) — Prediction market platforms Polymarket and Kalshi have implemented new rules aimed at preventing insider trading, following scrutiny from senators and concerns raised after instances of potentially illicit activity on the platforms.
Kalshi announced it would prohibit political candidates from trading on contracts related to their own campaigns. The platform will also block individuals involved in college or professional sports from trading contracts pertaining to those sports, according to a company spokesperson who stated the changes “further demonstrate our commitment to safe markets.”
Polymarket responded with a similar policy, clarifying that users are barred from trading on contracts where they possess material non-public information or have the ability to influence the outcome of an event. This includes not only athletes but also company officials and policymakers, Neal Kumar, Polymarket’s chief legal officer, said in a statement. “These rule enhancements make our expectations abundantly clear for every participant across both platforms,” he stated.
The moves come as lawmakers consider legislation that could significantly impact the industry. Senators Adam Schiff, a Democrat from California, and John Curtis, a Republican from Utah, have introduced the “Prediction Markets are Gambling Act,” which would restrict prediction markets from offering contracts related to sporting events. The legislation aims to address concerns that these platforms could be used for illegal gambling.
The platforms have faced increasing criticism in recent months. Polymarket, in particular, drew fire after users made substantial bets ahead of events like the war with Iran and military action in Venezuela earlier this year, raising questions about whether those bets were informed by non-public information, according to NBC News. The company has also been criticized for its partnership with Major League Baseball as an Exclusive Prediction Market Exchange Partner, a move that drew condemnation from Representative Alexandria Ocasio-Cortez.
Ocasio-Cortez, in a post on X, described gambling as “not excellent for society,” citing concerns about addiction, debt, and domestic violence. While acknowledging the new rules, she argued they were insufficient, stating, “Just on the policy piece alone, there are SO many individuals – staff, advisors, consultants, cabinet secretaries, spouses, and more – that can trade on insider information. What we have is just a fig leaf to deflect from criticism. We need to do more.”
Polymarket has stated it employs a “multi-layered monitoring system” and collaborates with surveillance and technology specialists to detect violations of its terms of use. The company indicated it could refer suspicious activity to law enforcement and take other disciplinary measures. Kalshi and Polymarket are the two largest platforms in the prediction market space, and the new rules represent an attempt to preempt potential regulatory action and address concerns about market integrity.