Senators Ban Themselves From Using Prediction Markets

WASHINGTON — The U.S. Senate unanimously adopted a ban on its members or their staffers trading in prediction markets on Thursday.

The Senate ban represents the first step Congress has taken related to a fast-growing industry that’s made almost everything in public life a gambling opportunity.

Sen. Bernie Moreno (R-Ohio), who introduced the resolution, suggested it was more about Congress than the prediction markets themselves.

“It’s imperative that the American people have more faith and trust in this institution. And this is just one little piece that we can take off the board,” Moreno told HuffPost.

Prediction markets allow people to buy “event contracts” that pay out based on yes-or-no outcomes. In the past year, thanks to the Donald Trump administration’s permissive stance toward the industry, prediction market betting has spread from elections to sports to random stuff like the length of a presidential address or the duration of a national anthem performance.

There seem to be endless opportunities for unethical betting by people with inside knowledge of events. Last week, the Justice Department announced an indictment against an Army soldier for improperly using classified information to place Polymarket bets. He’d won $400,000 betting on U.S. military action in Venezuela and the ouster of Venezuelan President Nicolas Maduro — an action he helped plan and execute.

Highlighting the opportunity for insider trading by lawmakers, the prediction market platform Kalshi announced last week it had suspended from its platform three congressional candidates who’d bet on their own campaigns.

The Commodities Futures Trading Commission, the federal agency that oversees prediction markets, greenlit the explosion of event contracts by scrapping its past guidance last year. Last month, the CFTC asked the public for input on how it might regulate the industry.

Multiple members of Congress in both parties have drawn up legislation addressing prediction markets. Bills target betting by people with knowledge of events and betting by government officials. One bipartisan proposal would disallow prediction markets from offering event contracts on pro sports. (States have sued to try to stop prediction market platforms from taking over state-regulated sports betting offered by companies like FanDuel and DraftKings.)

It’s not clear how soon any bills could advance in the House or Senate, however. Sen. John Boozman (R-Ark.), chairman of the Senate Agriculture Committee, which oversees the CFTC, said he has no plans to hold a hearing.

“We are waiting to see how the CFTC acts, what kind of enforcement mechanisms they’re going to put in place,” Boozman told HuffPost.

Boozman’s counterpart in the House, Rep. Glenn Thompson (R-Pa.), said he’s been holding roundtable meetings with lawmakers and industry experts.

“We have a lot of education to do with our members on that, especially as it becomes really relevant after the accused member of the military that placed a significant bet with inside information,” Thompson told HuffPost.

Thompson said it would be helpful if the CFTC had its normal complement of five commissioners instead of just one. Democrats have complained about the vacancies, to no avail.

“What the CFTC is doing is protecting the corruption,” Sen. Chris Murphy (D-Conn.), who has proposed legislation banning prediction markets on government actions, told HuffPost. “It’s very clear that this administration is pro-prediction market corruption, because they and their friends are making a lot of money off the corruption.”

Moreno, author of the ban for senators, said he expected the House to adopt a similar resolution. He said Congress should look into further oversight of prediction markets, but that it would take time. (His prediction market resolution was first reported by Punchbowl News.)

“That’s going to require hearings for us to dive deep and understand what’s actually happening there. That doesn’t happen in five minutes,” Moreno said.