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The House Committee on Oversight and Government Reform is probing Polymarket and Kalshi over alleged insider trading. Committee Chair James Comer notes that internal records held by prediction markets are the only means to identify and determine platform compliance.
The congressional probe focuses on whether traders on prediction markets exploit nonpublic, classified government data to profit from event contracts. Chairman Comer announced the investigation on CNBC’s “Squawk Box.” He also revealed that formal information request letters have been sent to Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour.
The House Oversight Committee has mentioned several suspicious trading incidents, including allegations that a U.S. Army sergeant used classified information to earn $409,000 in profits on Polymarket. Additionally, Kalshi recently penalized three congressional candidates for betting on their own electoral races. Mark Moran, Matt Klein, and Ezekiel Enriquez were slapped with 5-year bans and fines.
Kalshi’s move is proof that prediction markets can regulate their own platforms. However, the committee demands that both Kalshi and Polymarket submit internal documents and compliance data regarding user verification, geographic restrictions, and surveillance systems to help detect insider trading.
Kalshi supports ban on Congress members from trading
Kalshi explained in a May 20 statement that it had taken the enforcement action after launching new safety measures. Kalshi executives and board members have publicly supported legislation that would ban members of Congress from trading. The move aligns the platform with the Oversight Committee’s objectives rather than fighting them.
Kalshi also emphasizes that it employs a dedicated surveillance team of about 20 people to monitor for manipulation. It also employs “Know Your Customer” (KYC) checks to screen out government officials. The platform is likely to present these data points in its June 5 submission.
Polymarket is also responding by using technology to promise sweeping transparency that traditional markets cannot match. The platform recently partnered with Chainalysis to directly counter claims of insider trading. The partnership aims to scan transactions in real time and flag potential insider activity (especially from whales). Polymarket creates a digital paper trail that can be shared with regulators.
Polymarket’s response to the House Oversight Committee’s document request also emphasizes that all its transactions are publicly available on the blockchain. However, although the platform may lack the traditional internal memos Comer requested, it can offer a complete ledger of every trade ever made. That offers more visibility than traditional finance.
Comer emphasizes that Congressional action may be necessary
House Oversight Committee Chair James Comer emphasizes that Congressional action may be necessary due to increasing insider trading activity on prediction markets. Elizabeth Diana, Kalshi’s head of communications, recently stated that prediction platforms are looking forward to engaging with the Committee and its members about systems and processes that have been built over the years.
“Specifically, we are examining the adequacy of company safeguards to prevent access to offshore sites to circumvent compliance with applicable U.S. federal regulations governing prediction market platforms…The Committee requests documents and information to better understand how [Polymarket and Kalshi] implement identity verification for domestic and international account holders…” James Comer, Chairman of the House Oversight Committee
A recent investigation by the New York Times has revealed that over 80 Polymarket users placed suspiciously timed wagers. There are also rumors of exact betting ahead of military strikes. Some of the bets were made hours before the U.S.-Israeli military operations against Iran happened. These bets are worrying because safety across prediction markets may not be sufficient.
Chairman Comer has also noted that the growth of these platforms may have accidentally created conditions that bad actors can exploit. The focus is on individuals with national security clearance.
The rapid global expansion of these prediction markets is also concerning because internationally placed event contracts may not be subject to the same identity verification and insider trading bans as domestic event contracts. Comer points out that bipartisan members of Congress have introduced bills that they intend to use to rein in prediction markets.
A letter from seven Democratic lawmakers, led by Rep. Chris Pappas of New Hampshire, also calls on the Oversight Committee chair to subpoena the prediction platforms. The American public has a legitimate interest in knowing whether individuals entrusted with classified national security information can use that access for personal financial gain.
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