New ethics concern: Could officials profit online from events they influence?

WASHINGTON — From the timing of the American-Israeli military assault on Iran to whether a Long Island politician will win back his former U.S. House seat, predictive wagering on government and political events is a boom industry.

But the ability to make money online by wagering on future events raises a troubling prospect: that government officials could profit off events they may know about ahead of time or even have a hand in shaping.

Now a new bill from New York’s Kirsten Gillibrand with other Democratic U.S. senators seeks to ban high-level officials — including the president and vice president and Congress members — from trading on government-related decisions, events and outcomes.

"Senior federal officials should not be betting on the outcomes of specific events that they have the power to influence — that’s just common sense," Gillibrand said in a statement to Newsday.

The betting platforms under scrutiny — such as KalshiEX, LLC (Kalshi) and Polymarket — have evolved from catering largely to sporting outcomes and such things as Oscar winners, to markets where users also engage in billions of dollars of wagering each week on real-world events ranging from public policy, elections, the economy and national security concerns.

This focus on this political-outcome betting through predictive "event contracts" has been heightened by reports that an anonymous trading account under the username "Magamyman" made more than $553,000 on a bet that Iran’s Ayatollah Ali Khamenei would be removed from power.

The bet with Polymarket, a New York-based prediction market, was made just moments before an Israeli airstrike killed Khamenei.

Half a billion dollars was also traded on Polymarket on when exactly U.S. forces would drop bombs on Iran. And earlier this year, an anonymous trader made more than $436,000 on Polymarket by appearing to anticipate former Venezuelan President Nicolás Maduro's capture by U.S. forces.

Currently, there is also an expanse of other wagering opportunities on Polymarket and Kalshi that ranges from aspects of the 2028 presidential election, predicting the date of ground troops in Iran or when a U.S.-Israeli ceasefire with Iran will occur, or what the U.S. tariff rate on China will be in June — and even whether the U.S. government will acknowledge the existence of extraterrestrials before 2027.

Betting topics also are available on specific New York and Long Island matters, such as who will win the race for governor this fall, or the House of Representatives seat now held by Rep. Laura Gillen (D-Rockville Centre), to whether former Rep. Anthony D’Esposito or others are likely to be the Republican nominee to run against Gillen for that congressional seat from Nassau County.

No reporting requirement

While current government ethics rules require Congress and other government officials and their families to report income and the source on financial disclosure reports, there are no requirements to report what they actually bet on or to specify amounts earned to specific "event contracts." And it is now nearly impossible to track such action.

The bill to change that, the End Prediction Market Corruption Act, is co-sponsored by Gillibrand with Sens. Jeff Merkley (D-Ore.), Amy Klobuchar (D-Minn.) and others.

Craig Holman, a legislative representative with Public Citizen — among the government watchdog groups backing the bill — has been calling on the Commodity Futures Trading Commission to investigate recent suspicious bets, including those related to the timing of the American-Israeli military assault on Iran and the death of Iran’s Ayatollah Ali Khamenei.

Holman and others also want the CFTC to reverse its relatively new policy of allowing prediction market platforms to bet on virtually anything, anytime — especially in the realm of political events subject to manipulation by government officials.

"At the very least, government officials should be prohibited from trading on the political prediction markets," Holman wrote to the CFTC on March 5. "Gambling is supposed to be a game of chance on matters that cause no harm to the social fabric, not a game of exploitation that robs society for personal self-enrichment."

In addition, Merkley and other lawmakers have introduced other legislation that would ban certain types of event contracts related to war and elections altogether.

Proposed enforcement

The bill that Gillibrand is co-sponsoring specifically instructs the Commodity Futures Trading Commission to issue the new regulations banning bets by Congress and senior executive branch officials. It makes the Justice Department the enforcement arm for these rules, prescribing $10,000 fines for each violation along with forfeiture of any profit. There could also be criminal prosecutions.

The fate of the legislation is unclear. Congress has struggled for years — and failed — to pass bills that would prevent lawmakers from trading in stocks because of concerns of insider knowledge of legislative or regulator developments and other events through their jobs.

Kalshi's chief executive has said the company "is supportive" of making it illegal for government officials to trade on inside information on prediction markets.

"Why? Because we already implement" a ban, CEO Tarek Mansour wrote on LinkedIn in January. "Our insider trading rules are adapted from the rules on NYSE and Nasdaq: If you have material nonpublic information on a market, you cannot trade it and if you do, you are committing a financial crime."

"This applies to government employees, policymakers, executives or anyone who holds information that is legally not meant to be public," he said.

Gillibrand says she is "working across the aisle to get this critical bill across the finish line."

The End Prediction Market Corruption Act, she said, will "reduce conflicts of interest and help Americans trust that government decisions are not being tied to officials’ personal financial interests."