Shaheen and Colleagues Push Regulators to Address Illegal Insider Trading in Prediction Markets

**Multiple incidents prompted speculation about possible insider trading in prediction markets by federal employees**
(Washington, DC) – U.S. Senator Jeanne Shaheen (D-NH), alongside over 40 lawmakers, sent a letter to the Commodity Futures Trading Commission (CFTC) and the Office of Government Ethics (OGE) urging the agencies to address illegal insider trading in prediction markets by federal employees.Since January, multiple incidents have prompted heavy concern about possible insider trading in prediction markets by federal employees. A Polymarket usermade $400,000by betting on the capture of Venezuela’s former leader, Nicolas Maduro. Prediction market users projected that White House Press Secretary Karoline Leavitt’s speech would last for less than 65 minutes and profited when sheabruptly endedthe speech just 30 seconds before the 65-minute mark. Since then, there have been numerous reports of suspicious trades relating to thewar in Iran.
The Senators wrote, in part:“We ask that the Commodity Futures Trading Commission (CFTC) and the Office of Government Ethics (OGE) circulate executive branch–wide guidance explaining that federal employees must refrain from insider trading in prediction markets.”
They continued:“Under the Commodity Exchange Act (CEA), as amended by the STOCK Act, it is “unlawful for any employee or agent of any department or agency of the Federal Government” to use certain information — information that (1) is non-public, (2) is acquired by virtue of the individual’s government employment, and (3) may affect or tends to affect the price of a commodity or swap — “in his personal capacity and for personal gain to enter into, or offer to enter into” a futures contract, option, or swap. The CFTC has determined that event contracts are derivatives that depend on the occurrence or nonoccurrence of an event “with a potential financial, economic, or commercial consequence.”
They concluded:“In short, given the exponential growth in prediction market trading, rising evidence suggesting possible governmental insider trading in prediction markets, and potential confusion surrounding existing law in this area, we ask that the CFTC and OGE issue guidance reminding federal employees of their existing legal obligation to refrain from using their insider governmental information to profit from prediction market trades.”
The full text of the letter can be foundHERE.
Shaheen has long been an advocate for government reform and integrity. In June of last year, Shaheen introduced theBan Congressional Stock Trading Act, which would require all members of Congress, their spouses and dependent children to place their stocks into a qualified blind trust or divest the holding—ensuring they cannot use inside information to influence stock trades and make a profit. Shaheen also led?legislation?that would prevent companies owned or controlled by Special Government Employee (SGE)’s from raking in federal dollars in government contracts and grant payments and prevent the clear conflicts of interests this arrangement could pose. Earlier this year, she reintroduced her?Democracy for All Amendment?that would overturn the Supreme Court's disastrous Citizens United v. FEC decision and other far-reaching decisions around campaign finance that wrongfully equated money with free speech and unfairly determined that big, wealthy corporations have the same First Amendment rights as people.?
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