Democrats are proposing a ban on prediction markets that allow wagers on government actions or potentially rigged outcomes after bets over U.S. attacks against Iran and the arrest of former Venezuelan dictator Nicolas Maduro made users thousands of dollars.
Sen. Chris Murphy (D-CT) and Rep. Greg Casar (D-TX) unveiled legislation titled the Banning Event Trading on Sensitive Operations and Federal Functions Act on Tuesday, the latest bill seeking to regulate prediction markets.
“These are fundamentally corrupt markets,” Murphy said during a press conference. “They are rife with insider trading, and they offer incredibly perverse incentives, especially inside government, for government actors to push official decision-making towards their financial interests.”
Murphy pointed to bets made on Polymarket, a market platform that is not fully regulated in the United States, regarding whether or not the U.S. was going to attack Iran the next day, as a prime example of why he feels the BETS OFF Act is necessary.
At least one user, with the username “Magamyman,” on Polymarket made more than $553,000 for betting that Iranian Ayatollah Ali Khamenei would be out of power hours before U.S. strikes killed him on Feb. 28.
The account, which was displayed on a poster board behind Murphy and Casar during their remarks to the press, was created in October 2024.
Prediction markets are largely federally regulated by the Commodity Futures Trading Commission, and U.S. law prohibits trades on death or war. Insider trading laws also prohibit trades based on material and nonpublic information.
Still, Murphy described the bets placed on Polymarket as happening on a “very exceptional day,” before going on to allege that someone in or close to President Donald Trump’s White House who knew of the imminent attack, “cashed in” on their knowledge.
“Most of those accounts were set up on the day that they made those bets,” Murphy said. “That is fundamentally corrupt, and it is frankly stunning to people that it is legal, that it is allowed for.”
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“The only special interest guiding the Trump Administration’s decision-making is the best interest of the American people,” White House spokesman Davis Ingle said in a statement.
The CFTC in March asked prediction market platforms to work with regulators before opening markets that could be vulnerable to insider trading, marking a step toward asserting its authority over platforms.