Forget pluck, elbow grease and a little old-fashioned hard work. In some corners of today’s markets, getting rich can be as simple as leveraging insider information to bet big on prediction markets.
On April 23, a U.S. Army Special Forces soldier was charged with using classified information about a secret mission to capture Venezuelan leader Nicolás Maduro to place bets on a prediction market, turning about $33,000 into more than $400,000 in profit.
Days earlier, Gov. JB Pritzker issued an executive order barring state employees from using insider information to place bets on prediction markets, such as Kalshi and Polymarket, an extension of existing state ethics rules. Last Thursday, the U.S. Senate adopted a resolution banning members and staff from participating in prediction markets.
These steps expose a deeper truth: Insiders in government have advantages in markets that ordinary Americans simply don’t.
Prediction markets allow people to bet on outcomes in everything from elections to wars to the Super Bowl. Political candidates have bet on their own elections. Suspiciously timed trades betting tens of millions or more on future oil prices have been made just before market-moving announcements from the White House.
Here’s the thing — prediction markets like Kalshi and Polymarket already have explicit bans on insider trading and systems to flag suspicious bets, though their ability to detect insider information itself is limited. Enforcement mechanisms, such as freezing accounts, canceling trades and clawing back profits, already exist as part of the private contract between the individual gambler and the house. In the case of the political candidates mentioned above, Kalshi fined and suspended them for five years.
“Kalshi already proactively blocks members of congress and enforces against insider trading. This is a great step to increase trust in our markets by making it an industry standard,” Kalshi co-founder Tarek Mansour wrote on X after the Senate resolution passed.
These bans codify private rules into law. But they also carry an important symbolic element, acknowledging — and opening the door to discussing — a much deeper problem related to the structural imbalance of power between the people governed and their government. Once you concede that it’s unethical to use insider information to make money on the prediction markets, there are some obvious next steps to address.
The same logic applies more consequentially to the stock market.
Ethics reform that would clamp down on congressional stock investing is popular across the political spectrum, with a majority of Americans supporting rules that put taxpayers on equal footing with their representatives. It’s not hard to see why, or to find examples to exemplify the structural imbalance of power.
The Nancy Pelosi Stock Tracker is an X account dedicated to “highlighting politicians’ trades so we can invest alongside.”
In early 2020, at least two senators attended closed-door COVID briefings and then sold millions in stocks before the February 2020 crash. The Department of Justice investigated these claims, but no charges were filed. For many critics, this became a defining example of the system’s failure: insiders appeared able to capitalize on an informational advantage at exactly the right moment, with no legal consequences.
Reform proposals center on sharply limiting or banning congressional stock trading while strengthening enforcement with independent watchdogs that have real investigative power. Equally as important, these changes are meant to serve as visible “credibility signals” to the public, demonstrating that lawmakers are not using their positions for personal gain. And many of them are bipartisan.
Pritzker and the U.S. Senate have opened the door on the need for ethics reforms when it comes to unfair advantages those in government may have in regards to the markets. It’s time to walk all the way through it.
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