Democrats Take House and Senate, Then Train Fire on Kalshi and Polymarket

Democrats, fresh off capturing both congressional chambers in the November 2026 midterms, are preparing legislative action against prediction markets operated by Kalshi and Polymarket. Senator Jeff Merkley and Representative Maxine Waters, both critics of election wagering, are drafting measures aimed at the platforms as of this month. The irony is structural, not rhetorical: the markets predicted the victory of the very lawmakers now promising to police them.

The forecast record is difficult to dismiss. On Election Day, Kalshi priced a Democratic House majority at 93 to 94.5 percent and a Democratic Senate majority at 73.5 to 76 percent. Both outcomes occurred. In race-by-race terms, the market favorite won 479 of the first 487 contests decided, according to Kalshi's own data. That figure is self-reported, and no independent audit of it has been published.

Volume followed accuracy. Election-related contracts on Kalshi and Polymarket together drew more than $3 billion in trading volume this cycle. Kalshi alone accounted for more than $2.5 billion of that total. The takeaway in plain words: the product category most troubling to lawmakers is also the one generating nearly all the revenue.

What are Merkley and Waters actually proposing?

Neither lawmaker has yet introduced a bill, and the source discloses no legislative text, timeline, or committee assignment. What exists publicly is criticism on three fronts.

• Insider trading. A holder of nonpublic information about an election, a policy decision, or a military event could profit from a tied contract, rewarding access over analysis.
• Manipulation. Critics argue prices on high-profile contracts can be pushed around and then shape public perception of a race.
• Moral objection. Merkley and Waters oppose wagering on war and terrorism outright, regardless of how well the markets are policed.

Waters' position matters beyond rhetoric. A senior House Democrat focused on financial services holds the procedural leverage to convert criticism into formal oversight. Whether she does so is the question the next quarter will answer.

Why bipartisan letters may matter more than partisan anger

The scrutiny is not confined to one party. Before the election, Senator Elizabeth Warren, a Democrat, and Senator John Curtis, a Republican, sent bipartisan letters questioning the integrity of election contracts. The letters asked the platforms directly what safeguards they had deployed against insider trading.

That bipartisanship is the industry's larger problem. Partisan criticism typically stalls when control of Congress shifts, as it just did. Questions shared by members of both parties tend to persist across election cycles. The platforms have not, on the public record cited here, answered the insider-trading questions in full.

What does the accuracy data prove?

For Kalshi and Polymarket, the 479-of-487 record is the strongest available defense: markets that accurate are producing genuine information, not noise. A market calling roughly 98 percent of decided races correctly has evidentiary value that committees will find hard to wave away. The caveat is equally clear. Accuracy does not address manipulation, insider trading, or the ethics of war and terrorism contracts, and none of those issues is resolved by a correct forecast.

Exposure is uneven across product lines. Election contracts are the obvious pressure point, given both their volume and their political salience. War and terrorism contracts, a small slice of public attention, sit at the center of the moral argument Merkley and Waters are advancing. Small markets can carry disproportionate regulatory risk.

What to watch next

Three developments will define the enforcement window. First, whether Merkley or Waters introduces specific legislation, and which contract categories it targets. Second, whether congressional committees schedule hearings on prediction markets under the new majorities. Third, how the platforms respond to the insider-trading questions already on the record from Warren and Curtis.

With Democrats holding both chambers when the new Congress convenes, the probability of formal oversight has risen materially. The platforms' forecasts were correct about the election; whether their political risk models priced in this aftermath is a question their own markets have not yet answered.