US Rep. Torres preparing legislation to restrict federal trading on prediction markets

High-value trades on Polymarket linked to the sudden arrest of Venezuela’s Nicolás Maduro have drawn congressional attention, leading US Rep. Ritchie Torres to prepare legislation addressing insider trading in prediction markets.

Torres, a New York Democrat, is planning to introduce the Public Integrity in Financial Prediction Markets Act of 2026. The proposal would restrict certain federal officials from trading event contracts tied to government policy, government action, or political outcomes when they obtain nonpublic information through their official duties.

In a Sunday post on X, Punchbowl News founder Jake Sherman reported that the bill would apply to platforms engaged in interstate commerce. “The restriction applies to buying, selling, or exchanging prediction market contracts tied to government policy, government action, or political outcomes on platforms engaged in interstate commerce,” Sherman wrote, citing a source familiar with the matter.

Trading activity tied to Venezuela events

Attention to the issue followed reports on X that a newly created Polymarket account invested $30,000 on Friday in an event contract related to Maduro’s removal from power. Within about 24 hours, the position reportedly generated profits exceeding $400,000.

On-chain analytics firm Lookonchain said three wallets collected more than $630,000 from trades connected to Polymarket contracts tied to Maduro being removed from office by January 31. The reports circulated widely and raised questions about whether traders had access to information not available to the public.

The US action that led to Maduro’s arrest provided the context for the trades. While no official determination has been made regarding the identities of the traders, the timing of the transactions has drawn scrutiny from lawmakers and market observers.

Scope of the proposed restrictions

If enacted, the Torres legislation would bar politicians, political appointees, and members of the Executive Branch from trading certain prediction market contracts when they come into contact with nonpublic information through their jobs. The proposal mirrors insider trading standards applied in traditional financial markets but would extend those principles to the prediction market sector.

The bill would cover event contracts tied to policy decisions, government actions, and political outcomes, focusing on conduct by federal officials rather than on platform operations.

Prior instances raise similar questions

Concerns about trading on nonpublic information in prediction markets are not limited to the Venezuela-related activity. Last month, a Polymarket user generated more than $1 million in profits on contracts linked to features and release dates of upcoming Google artificial intelligence models, including Gemini 3. The account holder has been rumored to be an employee of Alphabet, Google’s parent company.

There has also been online discussion suggesting that trading activity tied to the debut date of DraftKings' prediction market offering involved insider knowledge. DraftKings Predictions launched on December 19.

Prediction markets currently operate without rules that directly address trading on nonpublic information in the same manner as traditional securities markets. Torres’ proposal would extend provisions of the Stop Trading on Congressional Knowledge Act of 2012, or STOCK Act, to prediction markets.