House Democrats Press CFTC Over Alleged Insider Trading in Prediction Markets

YM Lee

Summary

Seven Democratic members of the U.S. House of Representatives raised sharp questions about the CFTC’s lack of oversight and enforcement over alleged insider trading in prediction markets.
The regulatory dispute over Kalshi and Polymarket event contracts is continuing at both the federal and state levels, with the CFTC treating them as derivatives (swaps) and some state regulators viewing them as illegal sports betting.
Uncertainty has grown after David Miller, the CFTC’s enforcement director, said the agency would prosecute insider trading but would not “devote resources to minor matters.”

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Seven Democratic members of the U.S. House of Representatives are pressing the Commodity Futures Trading Commission over its handling of alleged insider trading in prediction markets.

Cointelegraph reported on April 7 that the lawmakers sent a letter to CFTC Chairman Michael Selig seeking an explanation for what they described as the agency’s weak response to suspected insider trading in war- and conflict-related event contracts.

In the letter, the lawmakers acknowledged that the CFTC has regulatory authority over prediction markets under the Commodity Exchange Act. They questioned, however, whether that authority is being properly exercised through oversight and enforcement.

They pointed in particular to suspicious trading in event contracts tied to potential U.S. military intervention involving Iran and Venezuela, citing the timing of the trades and the eventual outcomes. “These corrupt trades require swift and decisive oversight,” the lawmakers wrote.

The contracts have reached a level that is “morally difficult to accept,” they added. Allowing them to continue could deepen concerns about whether the CFTC has the capacity and willingness to act as a global regulator.

The lawmakers asked Selig to respond to six questions by April 15.

The regulatory fight over prediction-market platforms Kalshi and Polymarket is also unfolding at both the federal and state levels. The CFTC argues that the platforms’ event contracts are derivatives, or swaps, subject to federal regulation. Some state regulators, by contrast, have filed lawsuits arguing the products amount to illegal sports betting.

In a recent ruling, the US Court of Appeals for the Third Circuit upheld a lower-court decision limiting enforcement action by New Jersey regulators. The court said Kalshi had shown a substantial likelihood that its federal preemption argument could succeed.

Separately, David Miller, the CFTC’s enforcement director, said the agency would prosecute trading based on improperly obtained information, as well as tipping such information to others. But he added that the agency would not devote resources to “minor matters.”