In the wake of insider trading controversies, the White House recently warned staff members about using their roles in the federal government to bet on futures markets.
The Wall Street Journal reported that the admonition came in an email to staff on March 24 following a pause in strikes against Iran. According to the report, the administration sent the warning after a “mysterious flurry of activity kicked off in the futures markets.”
Despite the warning, three accounts apparently scored over $600,000 by correctly predicting the current ceasefire.
Legislation Would Ban Markets On War And Military Actions
The report said there was no evidence that members of the administration leaked or bet on prediction markets. However, critics are concerned federal employees and other politically-connected insiders may be using some information for their own financial gain.
But a White House spokesman told the WSJ that the administration remained adamant that government employees should be barred from engaging in insider trading.
“President Trump has been crystal clear. While he seeks a strong and profitable stock market for everyone, members of Congress and other government officials should be prohibited from using nonpublic information for financial benefit,” White House spokesman Davis Ingle said.
Assertions anyone within the administration was using inside information on futures markets was “baseless and irresponsible,” Ingle added.
Despite that, Democratic leaders and critics have raised concerns about the timing of event contracts betting over the last few months. Sen. Richard Blumenthal (D) and Sen. Andy Kim (D) have introduced a bill to ban prediction markets related to war and military action.
“Prediction markets have become a haven for insider trading, market manipulation, and underage gambling,” Blumenthal said in announcing the legislation.
“These billion-dollar businesses are turning war into a casino game, and creating a market for national security leaks. My measure – the Prediction Markets Security and Integrity Act – puts guardrails on this out-of-control industry. It bans dangerous and unethical bets and protects consumers from fraud and other predatory practices.”
Recent Prediction Market Controversies
The prediction market industry has seen several controversies involving alleged cases of insider trading over the last few months. In March, authorities arrested an Israeli Air Force reservist for using classified information to profit on prediction markets to the tune of $128,000.
Earlier this year, suspicious wagering on the prospects of Iranian Supreme Leader Ayatollah Ali Khamenei remaining in power also came to light. Likely insiders wagered seven-figures just before U.S. airstrikes killed Khamenei.
Crypto-analytics firm Bubblemaps outlined “six suspected insiders” who wagered $1.2 million on a US strike by Feb. 28 on Polymarket. One user wagered $26,000 and collected over $200,000, a return of 657%. This followed allegations of insider trading on Polymarket regarding the capture and arrest of former Venezuelan leader Nicolás Maduro.
In December, a user also apparently won 22 of 23 bets on the platform for more than $1 million, all in a single day. All the wins involved Google search markets. Some on social media alleged the user was an insider with the company.
