Kalshi and Polymarket Tighten Insider‑Trading Rules as Congress Proposes New Betting Ban
March 2026
Two of the most visible U.S.‑based prediction‑market platforms, Kalshi and Polymarket, announced on Monday that they are introducing stricter guardrails to curb insider trading and market manipulation. The moves come on the same day that Senators Adam Schiff (D‑CA) and John Curtis (R‑UT) unveiled bipartisan legislation that would forbid certain “event contracts” that regulators say resemble traditional sports betting.
New Trading Restrictions
Kalshi disclosed that it will prohibit political candidates from placing trades on contracts that involve their own campaigns. The platform is also extending the ban to individuals who have a direct influence on the outcome of sports events—such as professional athletes, coaches, referees and other officials. According to Kalshi’s chief executive, Tarek Mansour, the safeguards have been under development for several months and are intended to align the service with emerging regulatory expectations.
Polymarket followed suit by publishing a broader policy that bars any user who trades on the basis of non‑public, confidential information, illegal tips, or who can affect the result of a market. The company’s updated terms explicitly target accounts that appear to be using multiple identities to disguise insider activity.
Both platforms cited recent scrutiny over contracts that appeared to be informed by privileged data.
Background: Insider‑Trading Allegations
The tighter policies are a response to high‑profile incidents that raised doubts about the integrity of prediction markets. In early 2024, Polymarket users placed sizable bets on contracts that predicted a U.S. and Israeli airstrike on Iran shortly before the operation was publicly disclosed. A similar pattern emerged when a trader reportedly earned a six‑figure profit on a contract linked to a covert U.S. mission to detain Venezuelan President Nicolás Maduro.
Ben Yorke, a former Cointelegraph research analyst, told The Guardian that the timing and pricing of the Iran‑strike bets suggested the involvement of someone with insider knowledge, citing the use of multiple accounts to obscure the trader’s identity.
These incidents intensified calls from regulators and legislators for stronger oversight of prediction‑market platforms, which sit at the intersection of financial trading, gambling law, and emerging decentralized finance (DeFi) ecosystems.
Congressional Action: The “Prediction Markets Are Gambling Act”
On the same day the two platforms announced their rule changes, Senators Schiff and Curtis introduced the Prediction Markets Are Gambling Act. The bill aims to prevent Commodity Futures Trading Commission (CFTC)‑registered entities—including Kalshi and Polymarket—from offering event contracts that are “indistinguishable from gambling,” particularly those that mimic sports betting or casino games.
- Senator Schiff framed the legislation as a consumer‑protection measure, stating that sports‑prediction contracts are effectively bets and should not be marketed under a different name.
- Senator Curtis emphasized that the proposal would restore clear jurisdiction to state authorities over sports betting and casino activities, which are currently regulated at the state level.
Kalshi’s CEO responded on the social platform X, characterising the bill as a product of the “casino lobby” designed to protect existing gambling monopolies rather than to safeguard investors.
Legal Landscape and Industry Implications
Prediction‑market platforms have been fighting a series of state‑level lawsuits that argue their contracts constitute illegal gambling and therefore require state licenses. The operators counter that their products are regulated by the CFTC, a federal agency with exclusive authority over commodity‑based derivatives, and that the contracts are not wagers but financial instruments that aggregate dispersed information.
The new insider‑trading bans may serve a dual purpose:
- Regulatory Pre‑emptiveness – By voluntarily tightening rules, Kalshi and Polymarket hope to demonstrate compliance and potentially mitigate future enforcement actions.
- Market Confidence – Reinforcing the integrity of contracts could reassure users and institutional partners who have expressed concerns about the reputational risk of being associated with insider‑driven profit.
However, the bipartisan congressional bill could reshape the competitive environment. If enacted, it would effectively bar the two platforms—and any other CFTC‑registered prediction‑market operators—from listing a broad class of sports‑related contracts, narrowing their product offerings and possibly driving users toward unregulated or offshore alternatives.
Key Takeaways
| Takeaway | Explanation |
|---|---|
| Stricter insider‑trading rules | Kalshi bans political and sports‑influence participants; Polymarket expands its prohibition to anyone with non‑public information or market‑influencing capacity. |
| Regulatory pressure mounting | Recent high‑profile bets have drawn scrutiny from both regulators and lawmakers, prompting platforms to act pre‑emptively. |
| Bipartisan congressional bill threatens sports contracts | The Prediction Markets Are Gambling Act could prohibit event contracts that look like sports bets, impacting the core product lines of Kalshi and Polymarket. |
| Industry push‑back | Kalshi’s leadership frames the legislation as protection for gambling monopolies, highlighting tension between federal and state jurisdictions. |
| Potential market shift | Platforms may diversify away from sports‑related contracts or seek clearer regulatory guidance, while users could migrate to jurisdictions with looser restrictions. |
Outlook
The combination of self‑imposed guardrails and legislative action signals a pivotal moment for U.S. prediction markets. While the new policies aim to mitigate insider‑trading concerns, the fate of sports‑related contracts remains uncertain pending congressional deliberation. Market participants and investors should monitor both regulatory developments and the platforms’ compliance strategies, as the evolving legal framework could materially affect liquidity, product diversity, and overall market growth in the prediction‑market sector.
Source: https://cointelegraph.com/news/kalshi-joins-polymarket-user-bans-head-off-insider-trading?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
