Prediction markets just had their first real Washington moment. It wasn't a friendly one.
In a single week, a soldier got charged, three federal hopefuls got fined for betting on themselves, and the Senate quietly stripped its own members of the right to play.
What The New Senate Rule Does
The Senate passed the rule by unanimous vote on Thursday. It blocks senators from placing trades on sites like Kalshi and Polymarket. Both let users bet on real-world events, from races to sports to military news.
The rule kicks in right away. There was no debate, no vote tally to fight over, and no carve-outs.
This is the first time the Senate has shut its own members out of a market this big since the STOCK Act tightened stock trading rules more than a decade ago.
The push had been building for weeks. Sen. Chris Murphy, a Connecticut Democrat, and Rep. Greg Casar, a Texas Democrat, held a press event in March to roll out the "Bets Off Act," a bill aimed at banning sitting members from trading on these sites.
That bill never moved. The internal Senate rule did.
The Two Stories That Forced The Issue
Two stories from late April pushed the Senate to move.
On April 22, Kalshi said it had suspended and fined three federal candidates. One was running for Senate, two were running for the House. All three were caught trading on their own races.
Betting on yourself when you control the outcome is the textbook version of insider trading.
The next day brought something bigger. The Justice Department charged Master Sgt. Gannon Ken Van Dyke, an Army Special Forces soldier, with using classified intel to wager on Polymarket.
The bets covered the U.S. mission that captured Venezuelan leader Nicolás Maduro. Van Dyke was personally part of that mission. He cleared roughly $410,000 in winnings, per prosecutors.
In short, a soldier with knowledge of a real military mission profited by betting on it before the public knew what happened.
Where Rules May Go Next
The Senate's rule only applies to senators. The CFTC, the office that oversees U.S. futures markets, governs the sites themselves.
A group of Democrats in Congress sent a letter to the CFTC on Thursday. They asked the agency to do four things:
- Ban insider trading on the sites
- Block contracts on elections
- Block contracts on war and military missions
- Block contracts on sports and government calls that lack a real economic hedge
That is the wider battle. The Senate's rule is the easy first step. Reining in what investors and citizens can bet on is the harder one.
Both Kalshi and Polymarket have grown fast over the past two years. Kalshi got the green light from the CFTC to list event contracts on U.S. elections in late 2024. Polymarket runs offshore for U.S. users but pulled in record volume during the 2024 race.
Together, the two sites have become a parallel data layer for traders, reporters, and lawmakers. The Senate just made it harder for one of those groups to use them.
Worth Noting
CNBC, which broke the news, has a business tie to Kalshi that includes a minority stake.
The sites are still open and running. The customers most likely to be regulated next are the ones who never sat in the Senate.
