Prediction market platforms Kalshi and Polymarket have each announced new trading restrictions aimed at curbing insider trading, responding to growing concerns about market manipulation on event contracts. The announcements came on the same day that a bipartisan group of US lawmakers introduced legislation that would prohibit event contracts resembling sports bets or casino-style games. The simultaneous developments mark a significant moment of regulatory and industry pressure on the fast-growing prediction market sector.
Kalshi stated its ban had been in development for months and was designed to proactively address regulatory guidance and congressional legislation related to insider trading and market manipulation. The platform said it would prohibit political candidates from trading on contracts tied to their own campaigns, as well as individuals connected to college and professional sports, including athletes, team personnel, and referees. Polymarket, announcing its restrictions hours earlier, took a comparatively broader approach, barring users who trade on stolen confidential information, illegal tips, or who have the ability to influence a market’s outcome.
The platforms have faced sustained criticism following incidents in which Polymarket users appeared to profit from well-timed bets placed before US and Israeli strikes on Iran and a US military operation targeting Venezuelan President Nicolás Maduro. Former Cointelegraph research analyst Ben Yorke told The Guardian that the Iran strike bets suggested “someone with some degree of inside info,” noting that the wagers were placed at market price and spread across multiple accounts in what appeared to be an effort to conceal the trader’s identity. These episodes have intensified calls for clearer rules governing what is permissible on such platforms.
On the legislative front, Democratic Senator Adam Schiff and Republican Senator John Curtis introduced the Prediction Markets Are Gambling Act, which would prohibit Commodity Futures Trading Commission-registered entities — a category that includes both Kalshi and Polymarket’s US operations — from listing event contracts that resemble sports bets or casino-style games. Schiff argued that sports prediction contracts are effectively sports bets under a different name and that such contracts have been offered across all fifty states in violation of existing state and federal law. Curtis framed the bill as a measure to clarify regulatory jurisdiction and preserve states’ authority over sports betting and casino gaming.
Kalshi’s CEO, Tarek Mansour, whose company is a member of the Coalition for Prediction Markets lobby group, pushed back sharply against the legislation on social media platform X. He characterized the bill as the work of the casino lobby and argued it was designed to protect monopolies rather than consumers. His comments reflect a broader industry position that prediction market contracts do not constitute illegal betting and fall exclusively under federal CFTC jurisdiction rather than state authority.
The legal disputes are not limited to Congress. Kalshi, Polymarket, and Coinbase are currently involved in legal proceedings across multiple states, where authorities have asserted that sports event contracts constitute gambling requiring a state-issued license to offer. The platforms have consistently maintained that their products are distinct from traditional gambling and that federal oversight through the CFTC preempts state-level regulation. How courts and regulators ultimately resolve these jurisdictional questions is expected to shape the future of prediction markets in the United States.
Originally reported by CoinTelegraph.
