A bipartisan pair of House lawmakers introduced the PREDICT Act on March 25, targeting a practice that has drawn intense scrutiny since prediction market traders appeared to profit from advance knowledge of U.S. military strikes on Iran.
Representatives Adrian Smith (R-NE) and Nikki Budzinski (D-IL) filed the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act, which would prohibit members of Congress, their spouses, dependent children, the president, the vice president, and senior political appointees from trading on political prediction markets. Violations carry a civil penalty equal to 10% of the transaction value plus full disgorgement of any profits, paid directly to the U.S. Treasury.
The bill lands as crypto-native prediction platforms Polymarket and Kalshi face their most serious regulatory challenge since Polymarket's $1.4 billion election cycle made prediction markets a mainstream topic in 2024.
Six Wallets, One Airstrike, $1.2 Million
The immediate catalyst is a pattern of suspicious trading tied to U.S. and Israeli military operations against Iran. A CoinDesk investigation in late February found that six accounts on Polymarket, most funded within 24 hours, collectively won roughly $1.2 million by buying "Yes" shares in a "U.S. strikes Iran by February 28, 2026?" contract just hours before explosions were reported in Tehran.
That incident followed a CNN investigation published March 24 that traced a single trader who won 93% of five-figure wagers on Iran-related outcomes since 2024, netting close to $1 million. The trader's bets consistently preceded unannounced military operations, including Israeli strikes in October 2024 and U.S. airstrikes on Iranian nuclear facilities in June 2025.
Polymarket runs on Polygon, an Ethereum Layer 2 chain, meaning every bet is an on-chain transaction. That transparency is both the platform's defense (anyone can audit the trades) and its vulnerability (the suspicious wallets were trivially traceable). Kalshi, while not blockchain-based, has faced parallel scrutiny from the CFTC.
Not One Bill, but Three
The PREDICT Act is actually the third prediction market bill filed this month. Senators Jeff Merkley and Amy Klobuchar introduced the End Prediction Market Corruption Act, which covers similar ground but adds staff members to the ban list. Separately, Senators Adam Schiff (D-CA) and John Curtis (R-UT) filed the Prediction Markets Are Gambling Act, which would prohibit CFTC-registered entities from listing contracts that resemble sports bets or casino-style games.
Together, the three bills represent a pincer movement: one restricts who can trade, one restricts what can be traded, and the third (Schiff-Curtis) reframes prediction markets as gambling rather than financial instruments, a classification that would subject them to state gambling laws.
"Serving the American people is a privilege, not a pathway to profit," Smith said in a statement. Budzinski cited concern that "traders are profiting from events like potential military conflicts and government shutdowns using potentially inside information."
The CFTC has already responded to the political pressure. On March 12, its Division of Market Oversight issued a staff letter on event contract trading alongside an Advance Notice of Proposed Rulemaking, opening a public comment period on whether new prediction market regulations are warranted.
What This Means for Polymarket and Kalshi
Polymarket processed over $9 billion in volume during the 2024 U.S. election cycle and has grown into one of the most visible consumer-facing crypto applications. Kalshi, a CFTC-regulated exchange, has pushed aggressively into political and event contracts after winning a federal court battle against the CFTC in 2024.
The PREDICT Act would not shut down either platform. It targets traders, not exchanges. But the broader legislative package, particularly the Schiff-Curtis bill, could force structural changes to what contracts these platforms can list. If prediction markets are reclassified as gambling, state-by-state licensing requirements would fragment the market and potentially force Polymarket's U.S. operations further offshore.
For crypto users, the on-chain nature of Polymarket's contracts means the transparency that makes the platform valuable also makes it a regulatory target. Every suspicious wallet is permanently visible on Polygonscan. The same infrastructure that enabled trustless, permissionless political betting also created an irrefutable evidence trail that lawmakers are now using to justify restrictions.
The prediction market sector has attracted significant institutional backing. Polymarket and Kalshi's CEOs recently co-invested in a $35 million prediction market venture fund, signaling confidence in the industry's long-term trajectory. Whether that confidence survives three simultaneous bills in Congress will depend on how quickly the platforms can demonstrate that their self-policing mechanisms work, or whether the Iran trading pattern becomes the prediction market industry's FTX moment.
Overview
The bipartisan PREDICT Act would ban members of Congress, the president, and senior officials from trading on political prediction markets like Polymarket and Kalshi, imposing 10% fines and full profit clawbacks. The bill follows documented cases of suspicious trading ahead of U.S. military strikes on Iran, including one trader who won 93% of five-figure Iran bets and six wallets that netted $1.2 million hours before the February 28 airstrike. Two additional bills filed this month target what can be listed on prediction markets and whether the platforms should be regulated as gambling. The CFTC has already opened a public comment period on new prediction market rules.
