Rep. Torres Introduces Bill to Ban Insider Trading on Prediction Markets

Just two days after we exposed the three wallet addresses that collectively made $630,000 betting on Maduro’s capture—0x31a5…, 0xa72D…, and SBet365—Congress is responding.

Rep. Ritchie Torres (D-NY), co-chair of the Congressional Crypto Caucus, has introduced the Public Integrity in Financial Prediction Markets Act of 2026, legislation that would ban federal officials from profiting on prediction markets using classified or nonpublic government information.

What the Bill Does

The three-page legislation would prohibit federal officials from trading prediction market contracts when they possess material nonpublic information obtained through their official duties. The restriction applies to buying, selling, or exchanging contracts tied to government policy, government action, or political outcomes on platforms engaged in interstate commerce.

The bill defines prohibited trading as acting on information “that is not publicly available and that a reasonable investor would consider important in making an investment decision.” This mirrors the materiality standard used in traditional securities law—but that’s where the similarities end.

How This Compares to SEC Insider Trading Rules

There’s a massive gap between how insider trading is treated in stock markets versus prediction markets. Understanding this disparity is key to understanding why Torres’ bill exists—and why it may not be enough.

A former SEC attorney put it bluntly: “Traditional insider trading laws, as in, what is enforced by the SEC, definitely do not apply” to platforms like Polymarket. The CFTC’s insider trading task force—formed only in 2018—has nowhere near the enforcement infrastructure or legal precedent that the SEC has built over decades.

Torres’ bill attempts to bridge this gap by extending STOCK Act principles to prediction markets. The Stop Trading on Congressional Knowledge (STOCK) Act of 2012 made it illegal for members of Congress and their staff to trade stocks based on nonpublic information—the same concept now being applied to platforms like Polymarket and Kalshi.

The Offshore Problem: Does This Even Affect Polymarket?

Here’s where things get complicated. Polymarket operated offshore from 2022 to December 2025 specifically to avoid US regulatory jurisdiction. The platform settled with the CFTC for $1.4 million in 2022 after being accused of offering over 900 unregistered event-based binary options markets—and then promptly geoblocked US users.

Yes, Polymarket received CFTC approval in late 2025 to return to the US market through its acquisition of QCEX, a licensed derivatives exchange. The Trump administration eased the regulatory environment, and in July 2025, the CFTC and DOJ ended their probe into the platform.

But here’s the catch: the US version of Polymarket remains invite-only with a waitlist. The three wallets we identified—0x31a56e9E690c621eD21De08Cb559e9524Cdb8eD9, 0xa72DB1749e9AC2379D49A3c12708325ED17FeBd4, and SBet365—were trading on the offshore version. Even if Torres’ bill passes, enforcing it against anonymous wallet addresses on a decentralized protocol is a different challenge entirely.

Cross-border regulatory arbitrage, where platforms operate from permissive jurisdictions while serving customers globally through VPNs, creates fundamental challenges for national regulators. What can companies that geofence the US practically do to prevent Americans from accessing their services? And what does the government expect firms to do?

The Maduro Trading Scandal

As we detailed in our coverage of the Maduro insider trading scandal, blockchain analytics firm Lookonchain identified three wallets that collectively profited $630,000 by betting on the “Maduro in U.S. custody by January 31?” contract hours before the classified “Absolute Resolve” operation.

The wallets were created and pre-funded on December 27—two days after military officials reportedly first discussed the Venezuela operation. They bet exclusively on Venezuela-related outcomes with no prior trading history. When Trump announced the capture on January 4, those 6-7 cent shares resolved near $1 each.

A Torres spokesman said the bill had been “in the works for a bit,” but the Venezuela incident “underscored the urgency of introducing it immediately.”

Industry Response: Kalshi vs. Polymarket

The two dominant prediction market platforms have starkly different approaches to insider trading.

“Our compliance and legal teams investigate these issues when pursuing disciplinary and enforcement actions against traders.”
— Kalshi spokesperson on the company’s insider trading policies

Real Regulation or Political Theater?

Let’s be direct: insider trading in prediction markets isn’t new. It has always existed and will continue to exist. The question isn’t whether it happens—it’s whether there are meaningful guardrails to prevent it.

And right now, there aren’t.

The timing of Torres’ bill is telling. This isn’t proactive regulation—it’s reactive damage control after a scandal that made headlines. Congress has struggled for years to agree on cryptocurrency and AI regulations. There’s little indication prediction markets will be any different.

Torres’ bill currently has no co-sponsors. Even if it passes, enforcement against anonymous blockchain wallets operating through offshore protocols presents fundamental challenges. The CFTC lacks the resources and precedent that the SEC has built over decades of insider trading prosecutions.

Unless there are strict guidelines, clear amendments, and actual enforcement mechanisms—not just bills that look good in press releases—prediction markets will continue to make insiders rich. The $630,000 Maduro trade wasn’t the first. It won’t be the last.

The real test isn’t whether Congress can pass a bill. It’s whether anyone will be prosecuted when the next scandal breaks.