Two different laws banning congressional staff, members of Congress and federal officials from trading in prediction markets were introduced on Wednesday, March 25, one of which became effective immediately.
Massachusetts bans cryptocurrency prediction market
Washington’s battle against prediction markets continues. Following a bipartisan Senate bill introduced on Monday Targeting sports betting on platforms like PollyMarket and Calcci, Democratic Representative Seth Moulton of Massachusetts (MA-06) has officially banned all of his staff from “participating in prediction markets,” such as the aforementioned, “trading or holding positions on political, legislative, regulatory, or geopolitical outcomes, or any information learned in an official capacity.” Press release It is considered the first outright office-level ban in Congress.
Moulton’s reasoning is clear: Staff are meant to serve voters, not to take advantage of political choices and world events. In his view, prediction markets have become morally questionable as “playgrounds for corrupt insiders”:
Prediction markets have become a playground for corrupt insiders who are able to bet on things like election outcomes, wars, and even the deaths of public figures. This would create a harmful incentive structure that poses a real threat to American society today.
Congressional staff and the members who work for them are there to serve the voters of the districts they represent, not to profit from the very political decisions and world events we are here to respond to.
Nebraska bans cryptocurrency prediction market as well
On the Nebraska side, Congressman Adrian Smith (R-NE-03) And congresswoman Nikki Budzinski (D-IL-13) He introduced the Preventing Real-Time Exploitation and Deceptive Insider Trading in Congress (PREDICT Act), another bipartisan effort aimed at preventing members of Congress, their spouses, children, the president, vice president, and senior appointees from trading in political markets and markets for political outcomes.
Their basic argument and statement are very similar to Moulton’s. Recent incidents in which unidentified traders have made huge profits on contracts linked to the war with Iran or the length of the government shutdown have heightened concerns about inside information leaking into these markets. Smith said:
Serving the American people is a privilege, not a path to profit. This common-sense, bipartisan bill would give Americans confidence that the decisions of their elected officials are guided by merit, not personal gain.
Budzinski added:
The American people are tired of politicians using their influence for personal gain, and the rise of prediction markets has made these concerns even more important. In recent months, we’ve seen examples of anonymous traders making huge profits on events ranging from war with Iran to how long a government shutdown will last, raising necessary questions about the use of inside information.
The declaration stipulates that violation of the PREDICT Act will result in the imposition of a civil fine equivalent to 10% of the value of the prohibited trade, in addition to the requirement that all resulting profits be turned over to the US Department of the Treasury.
Growing concern for Washington?
These new episodes come on top Previous efforts such as Rep. Ritchie Torres’ Public Integrity for Financial Prediction Markets Actfollowing the arrest of former Venezuelan dictator Nicolas Maduro, which also targeted insider trading on platforms like Polymarket.
For on- and off-line prediction markets, a strict ban on US officials may actually de-risk the space by reducing major “insider” scandals, but it also increases the odds of stricter “know your customer” and surveillance requirements in the US.
While it has become increasingly clear that Washington is focusing its attention on ethically questionable cryptocurrency projects, it is not far-fetched to think that a similar logic could extend to other high-beta cryptocurrency venues where politics and profits clearly collide (for example, tokens closely linked to election or war outcomes). Traders would do well to price in the regulatory burden alongside the usual market risks.
BTC’s price drops slightly after reaching $71k yesterday, trading for around $69k today. Source: BTCUSD on Tradingview
Cover image from Perplexity, BTCUSD chart from Tradingview
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