U.S. lawmakers across both parties are seeking to shut federal officials out of prediction markets where bets on political outcomes have drawn mounting scrutiny.

Representatives Adrian Smith, R-Neb., and Nikki Budzinski, D-Ill., introduced the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act, or PREDICT Act, a bipartisan proposal on Wednesday to prohibit federal officials from wagering on political and policy events.

Broad strokes

The bill’s restrictions would broadly apply to bar members of Congress, the president, and vice president, political appointees, and senior federal employees — along with their spouses and dependent children — from entering into contracts tied to the outcome of elections, legislation, or other government actions.

Penalties are also explicit. According to the proposal, violators would face a civil fine equal to 10% of the transaction value. They would also be required to forfeit any profits, with the proceeds directed to the U.S. Treasury.

The proposal targets a gap that has become more visible as prediction markets expand. Platforms allow users to trade contracts linked to real-world events — from election outcomes to crypto markets, and geopolitical developments.

Policymakers argue that it creates financial incentives tied directly to information flow for insiders. Smith, in particular, said that access to nonpublic information creates an uneven playing field.

"Serving the American people is a privilege, not a pathway to profit," Smith wrote, adding that the bill is designed to ensure decisions are not influenced by personal financial gain.

Mounting scrutiny

Recent activity has intensified those concerns. Onchain analysis from Bubblemaps has highlighted accounts with unusually high success rates in betting on military developments, including strikes involving Iran.

The unnerving accuracy of these bets has raised questions about whether some traders may have acted on privileged information.

Further reporting pointed to nearly $1 million in profits from highly accurate trades across multiple accounts, with success rates exceeding 90% in certain markets. While no direct link to government officials has been established, the pattern has amplified calls for tighter oversight.

The scrutiny extends beyond individual traders, too.

Prediction markets themselves are facing pressure to strengthen safeguards. Platforms including Polymarket and Kalshi have tightened controls on potential insider activity and pulled certain high-risk markets following public backlash.

Amid the tension, regulators are also stepping in. The Commodity Futures Trading Commission has signaled plans to establish clearer federal rules for the sector, even as states crack down on platforms.