Regulatory pressure on prediction markets intensifies… Kalshi and Polymarket tighten ‘insider-trading firewalls’

Prediction-market platforms Kalshi and Polymarket are moving to tighten self-regulation as controversy over insider trading spreads.

According to Cointelegraph and others on the 24th (local time), Kalshi and Polymarket introduced new trading-restriction policies aimed at preventing the use of insider information and market manipulation.

Polymarket will prohibit trades based on stolen non-public or illicit information, and will also restrict participation by users in positions that could influence the outcome of specific events. Kalshi will implement measures to preemptively block politically exposed persons and other conflicted participants—such as politicians, athletes, and referees—from trading in related markets.

The move comes in response to a recent string of allegations of insider trading within prediction markets. In particular, debate over market fairness has intensified after reports surfaced of some users profiting ahead of events such as U.S. and Israeli strikes on Iran or Venezuelan political developments.

On the same day, a bill to tighten regulation of prediction markets was also introduced in the U.S. Congress. The bipartisan legislation, co-sponsored by Democratic Sen. Adam Schiff and Republican Sen. John Curtis, includes provisions to ban event contracts similar to sports betting or casino games.

If enacted, platforms registered with the Commodity Futures Trading Commission (CFTC) would be barred from listing sports- and casino-like contracts.

The industry’s reaction has been mixed. Platform operators argue that prediction markets are not mere gambling but information-based financial products, while regulators and some politicians maintain that they are, in substance, akin to gambling.