Torres bill would target government insider trading
Rep. Ritchie Torres and 30 other Democratic co-sponsors introduced a bill cracking down on insider trading after an anonymous user on Polymarket — a platform where people bet on real-world events — won a $400,000 bet that Venezuelan President Nicolás Maduro would be removed from office.
A few hours later, the U.S. captured Maduro, raising suspicion the new user had inside knowledge of the operation. The identity is still unknown, but the risk that it could have been a government insider was enough to legislate, Torres told The Press.
“Profiteering should have no place in the federal government, period,” he added.
Polymarket users are participating in what is known as prediction markets. Bets are placed with cryptocurrency on anything ranging from when the U.S. will strike Iran to what team will win an NBA game, making the platform controversial.
The Public Integrity in Financial Prediction Markets Act, announced on Jan. 9, aims to stop federal elected officials and other government employees from taking part in prediction markets if they have access to nonpublic information that could sway the outcome in their favor.
“If you’re both a government insider and a participant in the prediction market, you now have a perverse incentive to push policies that line your pockets. That, to me, is the definition of corruption,” Torres said.
In Polymarket’s terms of use, fraudulent trading is banned, but insider trading is not specifically mentioned. The company did not respond to requests for comment by press time.
The government bans insider trading in stocks through the Securities and Exchange Commission, SEC, laws, but prediction markets are more difficult to enforce since they fall under the Commodity Futures Trading Commission, CFTC.
“This area is just one massive loophole, because the CFTC has no clear authority on insider trading among federal government officials in prediction markets,” Torres said.
The Public Integrity in Financial Prediction Markets Act is still in early stages of the legislative process, but Torres said he believes the argument for the bill is simple.
“When it comes to government insiders, the term prediction is a misnomer,” he said. “If you’re part of the decision-making process, then you’re not predicting anything — you’re simply governing for profit.”
