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Prediction markets are facing increasing scrutiny over allegations of insider trading, prompting Kalshi and Polymarket to plan guardrails to curb potential incidents.At least 42 Democratic lawmakers have written the US commodities regulator and the US Office of Government Ethics, demanding that it warn federal employees not to use inside knowledge to trade in prediction markets.
to Commodity Futures Trading Commission Chair Mike Selig and the Office of Government Ethics, was prompted by “multiple incidents” that have fueled “speculation about possible insider trading in prediction markets by federal employees,” according to the letter. “We ask that the Commodity Futures Trading Commission and the Office of Government Ethics circulate executive branch–wide guidance explaining that federal employees must refrain from insider trading in prediction markets,” they wrote.“More recently, it has been reported that a number of users engaged in suspicious trades relating to the invasion of Iran and the death of Ayatollah Khamenei, sparking national security concerns about signaling impending attacks, and on whether former DHS Secretary Kristi Noem would be fired,” the lawmakers wrote.The group is requesting a briefing and answers to a range of questions by April 13, including whether the CFTC has investigated or received any reports of federal employees engaging in insider trading on prediction markets. They are also seeking information on what steps the CFTC is currently taking to detect and prevent insider trading by federal employees.the STOCK Act into law in 2012 to clarify and confirm that government officials may not use material, nonpublic information for their personal gain. In the latest letter, the lawmakers argued that the CFTC has declared that contracts on prediction markets are regulated derivatives, which means they are covered under the STOCK Act. “The CFTC has determined that event contracts are derivatives that depend on the occurrence or non-occurrence of an event with a potential financial, economic, or commercial consequence,” they wrote. “Thus, the CEA’s prohibition on government officials engaging in insider trading also applies to such activity in prediction markets.”Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy
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