WASHINGTON–Minutes before President Donald Trump announced ceasefire talks between Iran and the United States, anonymous traders bought $500 million dollars worth of oil futures, an investment that quickly paid dividends for the people behind it.
Trades like this and others on new prediction market platforms, like Kalshi and Polymarket, have raised questions among policymakers in Washington about insider trading.
Despite functioning the same way as a gambling sportsbook, where users put money down and are rewarded if they make correct predictions, prediction markets are not regulated the same way. “Bets” on these platforms are technically considered trades of event contracts.
While they offer contracts on sports, most of the controversy has come from predictions on geopolitical events. Trades on ceasefires and coup d’états have grown in popularity in the last few months, and some officials on the Hill say they have grown suspicious of well-timed investments on events like these.
“Whoever placed that bet knew what the president was about to post and made a lot of money off of that,” Rep. Jim McGovern, D-Mass., said in a House Committee on Agriculture hearing Thursday morning. “You and I both know that the odds of that bet is like a billion to one, and I have one example after another of similar bets.”
The Commodity Futures Trading Commission is the federal agency responsible for regulation of these prediction markets and any insider trading within them. The commission’s Trump-appointed chairman, Michael Selig, who testified at the hearing, is the only commissioner on the board, despite the Commodity Exchange Act dictating there should be five.
“We have a zero tolerance policy when it comes to fraud, abusive trading practices and manipulation, and anyone who engages in that behavior will face the full force of the law,” Selig said repeatedly throughout the hearing.
However, he declined to offer specifics of any investigations of suspicious trades when pressed by members of Congress.
Democrats on the committee questioned Selig about the commission’s ability to regulate insider trading with integrity, given his role as sole commissioner on what was intended to be a bipartisan board.
Selig said he looked forward to working with anyone the president might nominate in the future, but he will not refrain from making decisions on his own in the meantime.
“In the interim, we cannot, for the sake of the American people, slow down our ruling,” he said. “It’s very important that we get investor protections, consumer protections and safeguards for our markets, and so I cannot, unfortunately, commit to not do my job that I was appointed to do by the president.”
As chairman, Selig has launched his “Future-Proof” initiative to deregulate and modernize the commission.
“I believe it’s vital to break from the restrictive regulatory practices of the past and create derivatives markets that work for everyone,” Selig said.
McGovern pursued an aggressive line of questioning, raising the point that the president’s son, Donald Trump Jr., is a strategic advisor on the boards of both Kalshi and Polymarket.
“I think Donald Trump Jr. is trading his access for money, and I think it’s the definition of corruption, and I think that your actions to deregulate this market are helping them do it,” McGovern said.
The White House did not immediately respond to a Capital News Service request for comment.
Selig called McGovern’s line of questioning insulting.
“We do not pick winners and losers or engage in favoritism or bring politics into any of these matters,” Selig said.
Members of the Maryland delegation in Congress have also expressed their concern about the rise of prediction markets.
Rep. Jamie Raskin, D-Md., has sponsored the STOP Corrupt Bets Act, which would effectively ban platforms like Kalshi and Polymarket by making it illegal to make predictions on elections, government actions, sports and more.
“Unchecked prediction markets like Kalshi and Polymarket are ripe for corruption and reduce the most consequential public policy decisions to impulse bets and rip-offs on the house,” Raskin said in a statement to CNS. “The Trump administration isn’t serious about regulating these markets, stopping insider trading or unrigging our democracy. Congress must clean up this mess.”
Raskin, along with other House Democrats, signed a letter to Selig earlier this month, pressing him on why the commission hasn’t taken action against predictions on war, terrorism and assassinations.
Rep. April McClain Delaney, D-Md., the only Maryland member who sits on the agriculture committee, raised concerns about the lack of additional commissioners as well as about the oil trades around the war in Iran.
“This really raises questions about market integrity,” McClain Delaney said. “I’m concerned about how the CFTC can maintain long-term stability with global shocks and then also deal with this.”
Selig said the commission does have broad oversight over these markets, but future regulations are uncertain as he awaits public feedback.
“I’m not going to prejudge these questions,” Selig said. “We evaluate [market manipulation] and will continue to do so, but it’s really important that we continue to get the input from the community.”