A bipartisan group of U.S. senators has formally requested that major prediction market platforms disclose their internal controls for preventing insider trading. The inquiry, sent to the leadership of Kalshi and Polymarket, demands written responses by November 3, the date of the midterm elections. The letter expresses specific concern over the integrity of event contracts tied to political outcomes, which are increasingly viewed by the public as indicators of political momentum.

ETH / USD
Source: CoinGecko. Prices are indicative.

Specific Allegations and Past Incidents

The senators cited several precedents that raised red flags about market integrity. They referenced a February advisory from the Commodity Futures Trading Commission, which noted that a candidate was suspended and fined after social media evidence suggested he traded on a contract tied to his own candidacy. Kalshi subsequently disclosed three additional instances of candidates trading on their own races in April. Additionally, the letter pointed to reporting by NPR regarding campaign staffers using internal polling data before public release, as well as a 2024 Fortune report estimating that a significant portion of trading volume in a previous presidential market was affected by wash trading.

The inquiry also highlighted recent activity on Polymarket, including Wired’s report on over $600 million in trading volume related to elections in Ethiopia and Romania. The outlet noted that the Ethiopian market continued to trade for months after the vote, prompting Polymarket to block the involved accounts.

The Seven-Point Inquiry

The letter poses seven detailed questions to both companies. Senators Warren and Curtis asked how each firm prevents individuals with nonpublic information, such as candidates, pollsters, and election officials, from participating in trades. They also inquired about methods used to detect and stop circumvention of trading bans through third-party or affiliated accounts. Furthermore, the senators requested data on the number of suspected insider trading cases identified since January 1, how many were prevented before execution, and how many were referred to law enforcement or the CFTC.

The inquiry also asks whether surveillance systems have undergone independent evaluation and what additional safeguards will be implemented before the elections. The senators expressed skepticism that isolated enforcement actions are sufficient to demonstrate that these markets are adequately protected against manipulation.

Industry Responses and Legislative Context

In response to media inquiries, Robert DeNault, head of enforcement at Kalshi, stated that the company proactively blocks candidates and campaign staff from trading using Federal Election Commission payroll data. He noted that an independent market integrity committee has also been formed. Polymarket did not immediately respond to requests for comment, though recent reports indicate the platform is reviewing dozens of wallets that placed bets on Israeli election outcomes shortly before polls closed.