Two major prediction market platforms, Kalshi and Polymarket, on Monday announced new trading guardrails to address insider trading amid mounting concerns of market manipulation on recent event contracts.
It comes the same day that US lawmakers introduced a bipartisan bill to ban event contracts that resemble a “sports bet” or “casino-style game.”
Kalshi on Monday said it would preemptively ban political candidates from trading on their own campaigns and those known to be involved in college and professional sports, such as athletes, personnel, and referees.
Kalshi’s ban followed just hours after rival Polymarket revealed comparatively broader prohibitions to ban users who trade using stolen confidential information, illegal tips or those who can influence the outcome of a market.
The platforms have faced mounting criticism over insider trading after Polymarket users profited from well-timed bets before US and Israeli strikes on Iran and a US military operation to capture Venezuelan President Nicolás Maduro.
Ben Yorke, a former Cointelegraph research analyst, told The Guardian on Monday that the Iran strike bets were “someone with some degree of inside info,” as the bets were made at market price, and multiple accounts were used in an apparent attempt to obfuscate their identity.
Kalshi said its ban has “been in the works for months” and was made to proactively address regulatory guidance and legislation introduced in Congress involving insider trading and market manipulation on prediction markets.
Bipartisan bill would ban sports event contracts
Kalshi and Polymarket’s bans come after Democratic Senator Adam Schiff and Republican Senator John Curtis introduced a bill on Monday to ban certain event contracts “that are indistinguishable from gambling.”
The so-called Prediction Markets Are Gambling Act would ban Commodity Futures Trading Commission-registered entities, which would include Kalshi and Polymarket US, from listing event contracts that resemble “a sports bet or a casino-style game.”
“Sports prediction contracts are sports bets — just with a different name,” Schiff said. “These contracts have been offered in all fifty states in clear violation of state and federal law.”
Curtis said that the legislation “clarifies regulatory jurisdiction, ensuring that states can maintain their authority over sports betting and casino gaming.”
Related: US Senate bill targets prediction markets on war and assassinations
Tarek Mansour, the CEO of Kalshi, which is a member of the Coalition for Prediction Markets lobby group, posted to X that the bill was the “casino lobby hard at work.”
“This bill isn’t about protecting consumers; it’s about protecting monopolies,” he added.
Prediction market platforms, including Kalshi, Polymarket and Coinbase, are embroiled in legal action across multiple states, which have asserted that sports event contracts are gambling that requires a state license to offer.
The platforms have argued that their contracts are not illegal betting and are, regardless, subject to the exclusive jurisdiction of the CFTC, not state authorities.
Magazine: When privacy and AML laws conflict — Crypto projects’ impossible choice
