Prediction markets are back under the microscope with the midterms now less than a month away, and one lawmaker wants to draw a bright line around what candidates can do on those platforms. On Monday, Rep. Don Davis introduced the "No Betting on Your Own Race Act" during a pro forma House session, and his office shared the initiative exclusively with CNBC. The goal is to codify into law what platforms have been trying to police themselves: keeping candidates from placing wagers on contracts tied to their own races because of insider trading concerns.
Davis put it plainly: "We don't want our athletes to bet on their games. A candidate running for federal elected office should be treated exactly the same and should not be allowed to trade on their own election." He said Congress should pass the measure to make expectations clear for campaign committees.
The push followed a controversy in North Carolina's 1st Congressional District, a closely watched battleground. Laurie Buckhout, Davis's Republican opponent, reached a settlement with Kalshi in August after the company determined she had traded contracts linked to her candidacy.
She said, "I bet on myself. Literally," and called it "a dumb mistake," adding that she acted to fix it once she learned there was an issue. Buckhout paid a penalty a little under $2,600 and was barred from Kalshi for three years.
Davis later posted on X that her trades were "a disqualifying breach of public trust."
Platforms have been actively working to limit candidates from wagering on their own outcome contracts because of insider trading worries. And these markets are hardly niche anymore: on Nov. 6, 2024, a Kalshi billboard showing 2024 presidential odds sat across from the Nasdaq MarketSite in New York.
Rules on who may trade on their own decisions go to the heart of market fairness. Market Briefs covers these fights free every morning.
Under the proposal, anyone found trading event contracts linked to their own candidacy would receive the greater of a $10,000 penalty or three times the trade's net financial gain. The timing is tight, though. The House and Senate are not scheduled to convene again until after the midterms, so this measure is unlikely to affect the current cycle.
There is already movement on the broader rules. In April, the Senate adopted a resolution that prohibits trading on prediction markets by senators and their staff - something Kalshi and Polymarket publicly welcomed. That Senate action did not cover non-incumbent candidates for the chamber. The House has not passed a similar ban, although resolutions to do so have been introduced.
The takeaway for everyday investors is simple: rules around prediction markets are evolving in real time, and platforms are tightening enforcement. If these markets matter to you for gauging sentiment or odds, expect changing access and liquidity as policies shift.
Prediction markets are forcing old conflict-of-interest questions into the open. Get the free Market Briefs daily newsletter and follow the debate.
