Polymarket and Kalshi Tighten Insider Trading Rules as Senate Targets Sports Bets
Polymarket and Kalshi both announced stricter insider trading controls on March 23, 2026, the same day a bipartisan Senate bill was introduced to ban sports betting contracts from CFTC-regulated prediction markets. The timing is not coincidental. Both platforms are responding to documented abuse, not getting ahead of it, and the legislative pressure makes the posture even harder to dismiss as voluntary good governance.
Polymarket published updated market integrity rules covering both its decentralized platform and its CFTC-regulated US exchange. The new framework explicitly prohibits trading on stolen or confidential information, acting on illegally obtained tips, and placing wagers on outcomes that a trader has the power to influence. The platform also extended its bans to cover spoofing, wash trading, front-running, fictitious transactions, and self-dealing. These are not novel concepts in financial regulation, but their explicit codification on a prediction market is a meaningful step, even if it arrives well after the problems became public.
The enforcement backdrop is damning. Bloomberg reported that six newly created accounts, all opened in February 2026, collectively earned approximately $1 million betting on whether the United States would strike Iran. Every account bet exclusively on that single outcome. Polymarket also confirmed it banned and reported users who threatened an Israeli journalist over coverage of an Iranian missile strike, a dispute tied to a $17 million prediction market. That a journalist required protection because of how a contract resolved tells you everything about where these platforms had let things slide.
Kalshi Extends Bans, Senate Introduces the “Prediction Markets Are Gambling Act”
Kalshi matched Polymarket’s moves with its own set of preemptive restrictions. The platform said it would ban political candidates from trading on their own campaigns, and prohibit athletes, sports personnel, and referees from placing bets on contracts tied to their respective leagues or events. These are the obvious cases, the ones that should have been addressed from day one. Doing it now, under Senate scrutiny, does not make Kalshi a compliance leader. It makes them reactive.
The legislative threat is real. Senators Adam Schiff (D-CA) and John Curtis (R-UT) introduced the “Prediction Markets Are Gambling Act” on March 23, aiming to strip CFTC jurisdiction over event contracts that resemble sports bets or casino-style games. Senator Curtis framed it around protecting young people in Utah from what he described as addictive sports betting dressed up as federal financial contracts. The bill is bipartisan, which means it has a better chance of moving than most Capitol Hill posturing, and the industry knows it. Both platforms have already condemned the proposal, but condemnation is not a lobbying strategy.
This regulatory squeeze did not emerge from nowhere. As we reported, prediction markets have faced coordinated legal pressure across multiple jurisdictions since mid-March 2026, including Arizona’s 20 criminal counts against Kalshi and state-level enforcement actions in several other states alleging unlicensed gambling operations. The Senate bill is the federal layer on top of a state-level problem that has been building for weeks.
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On the compliance side, Polymarket’s US exchange now runs a three-tier monitoring structure: partnerships with specialized surveillance firms, a dedicated control desk operating continuously, and coordination with the National Futures Association. Violations can trigger account suspensions, financial sanctions, or formal regulatory notifications. The decentralized platform uses Polygon blockchain infrastructure to maintain a public record of all transactions, which at least gives outside observers something to audit. Whether enforcement will match the architecture remains to be seen.
Separately, and somewhat incongruously given the regulatory climate, former Kalshi employees are raising up to $35 million for a new venture fund called 5c(c) Capital, named after the Commodity Exchange Act clause granting CFTC oversight of event contracts. The fund is backed by the CEOs of both Polymarket and Kalshi, and targets investment in market makers, indices, and infrastructure tooling for prediction markets. Per CoinDesk’s reporting, the fund is betting that the underlying infrastructure layer will survive whatever regulatory shakeout hits the retail-facing platforms. That is a defensible thesis, but it requires the CFTC framework to hold, which is precisely what the Senate bill threatens to dismantle.
What we have here is an industry in damage-control mode that simultaneously believes its own growth story enough to raise fresh capital. The compliance announcements are necessary and overdue. The Iran betting scandal, the journalist threats, the anonymous accounts printing profits on geopolitical contracts: these were not edge cases, they were predictable failure modes that neither platform adequately anticipated. Tightening rules now earns no credit for foresight. The Senate bill may be blunt and imperfect, but the behavior that triggered it was worse. Polymarket and Kalshi have a narrow window to demonstrate that self-regulation can work. Based on recent history, skepticism is the only rational starting position.
