House Oversight Memo Urges Curbs on Official Trading in Prediction Markets

Staff of the US House Committee on Oversight and Government Reform have urged Congress to restrict government officials from trading prediction market contracts tied to government actions and political outcomes, citing a nearly 1,700-page document review and a five-month insider trading investigation.

In a November 13 memorandum, committee staff wrote: "Government personnel should be restricted, at a minimum, from trading on contracts related to government actions or political outcomes." The recommendation applies to government personnel, lawmakers and congressional staff regardless of whether they trade using confidential information.

What did the investigation cover?

The probe began on May 22 with Kalshi and Polymarket. It expanded in September to include Hyperliquid Labs, Crypto.com and PredictIt. Committee staff received nearly 1,700 pages of documents and communications and held five bipartisan briefings with platform representatives, legal counsel and employees responsible for detecting suspicious trading.

Four of the five platforms provided substantial documentation or briefings on their internal controls and surveillance systems. Hyperliquid stood apart. It told the committee it did not "possess the types of records and information" requested concerning identity verification and Know Your Customer policies and procedures.

Which trading patterns drew scrutiny?

The memorandum cited reports of a large leveraged short position on Hyperliquid established shortly before a US tariff announcement. Committee staff described the trading pattern as resembling potential insider trading.

The document also highlighted completed enforcement cases:

• A $1.2 million alleged insider trading scheme involving a Google engineer trading on Polymarket
• CFTC penalties against former Congressman George Santos over trades on Kalshi
• A CFTC penalty against a White House teleprompter operator, also involving Kalshi trades

Committee staff concluded that existing insider trading laws already apply to prediction markets, but argued current statutes leave gaps when officials trade contracts that directly reference their own institutional decisions.

How are platforms responding?

Polymarket has strengthened its surveillance through PolyGraph, a monitoring system built in partnership with blockchain analytics firm Chainalysis. The system combines on-chain analytics, social media intelligence, internal AI tools and other data sources to identify suspicious trading activity.

The memorandum also recommended improving information sharing between prediction market platforms and regulatory agencies, so that suspicious flows can be identified before enforcement becomes necessary.

What happens next?

The memo shifts the policy debate from whether insider trading law applies to prediction markets toward whether a separate conduct rule for government personnel is needed. Congress now faces the choice of codifying trading restrictions for officials and formalizing platform-to-regulator data sharing, decisions that would set compliance expectations for every US-facing prediction market operator, including Kalshi, Polymarket, Hyperliquid, Crypto.com and PredictIt.

By Tom Whitfield