Congress hits Polymarket and Kalshi with a massive insider trading probe

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Congress hits Polymarket and Kalshi with a massive insider trading probe Rep. James Comer is demanding internal records from the prediction market CEOs, warning that government employees could be using classified information to make “huge profits”. What to know: - The House Oversight Committee has opened an investigation into major prediction markets Polymarket and Kalshi over concerns that U.S. government employees may be using insider information to profit from policy and national security events. - Chair James Comer is seeking internal records from the platforms’ CEOs and has signaled he may pursue legislation to bar members of Congress, administration officials and other government employees from participating in prediction markets. - The probe comes amid rapid growth in prediction markets and mounting bipartisan scrutiny in Congress, with lawmakers and experts warning of national security risks, potential insider trading and problem gambling tied to the booming industry. The U.S. House Oversight Committee plans a probe into the largest prediction market platforms over suspicions that government employees could be exploiting classified information for personal gain. Rep. James Comer, R-Ky., chair of the House Oversight and Government Reform Committee, is seeding the internal records from the CEOs of Polymarket and Kalshi to determine if government employees are using insider knowledge to profit from policy and geopolitical and military operations, he said on CNBC's Squawk Box on Friday. “There’s a concern now that members of Congress, members of the president’s administration, any type of government employee, can use basic insider knowledge and make huge profits on anything government-related,” Comer told CNBC. “So we want to not only launch an investigation to see how widespread this has been thus far, but also to prove a case that we’ve got to pass some type of legislation,” Comer added. “And I think it wouldn’t be too much to ask to say members of Congress can’t participate in the predictions market, nor can government employees or people in the president’s administration.” Comer’s probe is the most recent in a series of attempts by Congress to investigate prediction markets and bring insider trading under control. In letters sent Friday to Polymarket’s Shayne Coplan and Kalshi’s Tarek Mansour, Comer demanded clarity on how the platforms handle identity verification, enforce geographic restrictions and flag anomalous trading activity. Prediction markets, which surged in popularity in recent years, have drawn scrutiny from federal and state lawmakers and regulators, who worry the platforms are ripe for exploitation by bad actors with national security clearances. Prediction market volumes could peak to roughly $1 trillion by 2030, as the sector evolves from niche wagering into broad-based “information markets” spanning sports, crypto, politics and the economy, according to a Wall Street broker Bernstein report in April. Volumes hit $51 billion last year and could reach about $240 billion in 2026. The House probe follows a heated U.S. Senate Commerce Committee hearing on Wednesday, where lawmakers from both parties heavily scrutinized prediction market platforms like Kalshi and Crypto.com. Senate Commerce Chair Ted Cruz (R-Texas) blasted the industry for enabling cheating scandals across major sports leagues, warning that the opportunity to profit on event contracts tempts athletes and officials to manipulate outcomes. Meanwhile, Senator John Hickenlooper (D-Colo.) accused the firms' aggressive social media marketing of "preying on our young people" and fostering problem gambling. Nicolas Vaiman, co-founder and CEO of onchain intelligence layer Bubblemaps, expressed deep concern over the national security implications of a new wave of insider trading in an interview with CoinDesk. He warned that if those observing the predictions markets can spot irregular trades, so can enemies of the United States. He and his team found 80 bets on Polymarket with a 98% win rate, which he said is statistically impossible to achieve. “Not even luck can explain those wins.” More For You Mike Eidlin, head of Japan at cryptocurrency exchange Jupiter, is leading Polymarket's efforts, according to reports. What to know: - Polymarket is set to lobby for authorization of prediction markets in Japan. - The prediction market platform has appointed a representative in the country and is aiming for government approval by 2030. - Polymarket has been under pressure to expand its reach into other major markets as legal scrutiny has hampered its...

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