New U.S. Legislation Takes Aim at Inside Trading in Prediction Markets

Rep. Ritchie Torres from New York is set to bring forward the Financial Forecast Markets Public Integrity Act of 2026, signaling a major regulatory shift in the rapidly growing prediction market sector. The proposed bill targets government insiders and those with privileged access to non-public information, aiming to establish clear guardrails for market participation among federal officials.

Core Restrictions Target Government Insiders

The legislation seeks to restrict federal lawmakers, political appointees, and executive branch staff from participating in transactions tied to contracts that enable financial forecasting on interstate platforms. The core concern centers on preventing individuals with potential access to confidential government intelligence from trading on prediction markets where political decisions, policy changes, or electoral outcomes drive contract values.

The bill specifically prohibits such transactions involving prediction market contracts where participants could leverage material non-public information—information they either possess directly or can reasonably access through their government roles. This ban applies to all forms of contract engagement, whether buying, selling, or exchanging positions on interstate commercial platforms.

Broader Market Implications

The proposal signals growing regulatory attention toward prediction markets as financial instruments gain mainstream adoption. By restricting inside participation in financial forecasting, the legislation aims to maintain market integrity and prevent information asymmetries that could undermine confidence in these emerging platforms.

The move reflects broader concerns about conflicts of interest and the potential for government insiders to gain unfair advantages in markets where policy outcomes serve as underlying assets. As prediction markets continue expanding, oversight mechanisms are expected to become increasingly important across multiple jurisdictions.