- Polymarket and Kalshi both published enhanced insider trading rules on March 23, the same day senators introduced the first bipartisan bill to regulate prediction markets.
- High-profile cases have drawn Congressional and CFTC attention to the sector.
- Kalshi has opened 200 investigations in the past year and penalised multiple traders, while Polymarket partnered with Palantir to build surveillance systems and signed a regulatory services agreement with the National Futures Association.
Prediction market operators Polymarket and Kalshi rolled out new insider trading restrictions on March 23 as Washington moved closer to curbing the sector.
Their policy changes landed hours before Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act, a bipartisan bill that would bar CFTC-regulated platforms from listing contracts that resemble sports betting or casino games.
The proposal adds to a broader push in Congress to treat parts of the prediction market industry as gambling rather than legitimate financial activity.
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Compliance Push Under Pressure
Both companies are basically trying to show they can police trading before lawmakers or regulators impose stricter limits.
Polymarket rewrote its rules for both its decentralised platform and its CFTC-regulated US exchange. The new language bans trading based on stolen confidential information, illegal tips, or any event where the trader can directly influence the outcome.
It also said it will use Palantir-built surveillance tools for sports markets and has hired the National Futures Association to handle trade practice surveillance on its US platform.
Kalshi focused on blocking suspect trades before they happen. Athletes and coaches are now barred from markets tied to their own sport, while political candidates cannot trade on contracts linked to their own campaigns.
The Cases That Raised A Few Eyebrows
The tougher stance follows a string of cases that exposed how vulnerable these markets are to non-public information.
In January, a Polymarket account created less than a week earlier placed about US$32,000 (AU$45,760) on Venezuelan leader Nicolás Maduro being removed from power shortly before Donald Trump announced a nighttime raid. The trade paid out US$436,759 (AU$624,565).
That episode helped drive a House bill from Representative Ritchie Torres focused on integrity risks in financial prediction markets.
In February, Israeli authorities arrested a civilian and a military reservist accused of using classified information to place Polymarket bets.
Kalshi separately fined and suspended Beast Industries employee Artem Kaptur over trades tied to non-public knowledge about MrBeast content decisions, imposing a penalty of US$20,397 (AU$29,168) and a two-year ban.
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