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U.S. Sen. Richard Blumenthal, D-Conn., introduced legislation Monday to set strict federal parameters on prediction markets, citing concerns over national security leaks and insider trading.
The Prediction Markets Security and Integrity Act is cosponsored by Sen. Andy Kim, D-N.J., but faces long odds of clearing the chamber under the current Republican majority.
Bill will ban markets on war and death
Increased government scrutiny follows controversial wagers placed on recent events, including airstrikes in Iran and the military operation that ousted Venezuelan President Nicolas Maduro. A small group of users purchased well-timed contracts on both events, signaling possible advanced notice of the actions. The wagers netted nearly $2 million in winnings for the unidentified individuals.
In a press release, Blumenthal characterized the industry as a threat to the public interest.
“Prediction markets have become a haven for insider trading, market manipulation, and underage gambling,” Blumenthal said.
These billion-dollar businesses are turning war into a casino game and creating a market for national security leaks. My measure puts guardrails on this out-of-control industry. It bans dangerous and unethical bets and protects consumers from fraud.”
The proposed legislation would:
- Establish federally enforceable rules on insider trading and market manipulation.
- Ban event contracts related to war, death, and military action.
- Mandate that states with legal sports betting meet federal standards for advertising, affordability, and artificial intelligence.
- Require strict age verification and prohibit advertising to minors.
- Reverse the Commodity Futures Trading Commission’s (CFTC) attempts to preempt state gambling regulations.
That final provision will likely prove a non-starter for the Trump administration, which appointed CFTC Chairman Michael S. Selig. Selig has remained staunchly opposed to any perceived incursion on his regulatory jurisdiction.
Addressing insider trading and security loopholes
The Iran and Venezuela contracts have placed the industry in a harsh spotlight. Blumenthal and Kim posit that individuals with classified information are profiting from military kinetic actions.
“Corruption and exploitation are thriving within the gaps and loopholes of prediction markets,” Kim said.
“This manipulation leaves a select few winning big at the expense of working Americans. By instating basic safeguards, we can better protect consumers and safeguard against real threats to our national security.”
A steep path toward Senate approval
The act faces significant political headwinds. The Trump administration has maintained a friendly stance toward the industry, and the Trump Media & Technology Group is currently preparing to launch its own platform, Truth Predict.
The bill would need to clear a 60-vote threshold in the Senate, requiring 13 Republicans to break ranks and join Democrats—an outcome analysts consider unlikely. Meaningful movement on the bill would likely depend on the results of the November congressional elections.
