Prediction markets are booming. Some lawmakers are betting against them.

• Lawmakers on Capitol Hill have some concerns about prediction markets.
• The most immediate concern is the potential for insider trading.
• But others worry about the spread of gambling and the markets' impact on culture.

Ask a member of Congress about the rise of prediction markets, and there's a decent chance they'll air some concerns.

"I think it's bad," said Democratic Rep. Alexandria Ocasio-Cortez of New York. "Obviously, I'm not gonna make many friends with this opinion."

"It's kind of sad," said Republican Rep. Abe Hamadeh of Arizona. "I think gambling has really destroyed a lot of young men's lives recently."

Prediction markets like Kalshi and Polymarket — where individuals can bet money on anything from sports, to the weather, to which words the president might use in a given speech — are exploding in popularity, buoyed by their use in the 2024 presidential election, a friendly regulatory approach from the Trump administration, and the occasional PR stunt.

But as with the rise of social media or the widespread adoption of generative AI, Congress is only slowly catching up with an industry that's increasingly a feature of everyday life for many Americans.

There have been a handful of one-off bills, including a recent bill to ban government officials from insider trading and a 2024 bill to specifically ban betting on elections. But no one seems to be thinking about the industry in a comprehensive way, despite some major unresolved legal questions, including whether the platforms should be regulated by states or the federal government.

"The status quo strikes me as unsustainable in the long run," said Democratic Rep. Ritchie Torres of New York, the author of the insider trading bill. He said that his proposal is "a logical place to start, but I envision it not as a ceiling, but as a floor."

Meanwhile, prediction markets are trying to get ahead of the backlash, including meeting directly with members of Congress and hiring some of their former colleagues to bring the industry's message to Washington.

"We've had dozens of conversations with lawmakers on both sides of the aisle over the past few months," Kalshi spokesman Jack Such told Business Insider. "We've always been a regulatory-first company and have made clear to lawmakers that we look forward to working in partnership with them to keep prediction markets transparent and safe."

And many on Capitol Hill still have yet to make up their minds when it comes to prediction markets.

"It's an issue I'm still examining," Republican Sen. Ted Cruz of Texas, the chairman of the Senate Commerce Committee, told Business Insider. "And I'm listening to arguments on both sides."

'An avenue for doling out favors'

For many lawmakers, the most immediate and tangible concern is the potential for corruption.

That's been especially true since early January, when an anonymous Polymarket trader made hundreds of thousands of dollars off a well-timed bet on former Venezuelan President Nicolas Maduro's capture.

Torres introduced his bill in the wake of that trade, while 12 Democratic senators sent a letter to Commodity Futures Trading Commission Chairman Michael Selig urging a crackdown on potential insider trading.

It's not just a matter of a White House ally possibly knowing about US military plans ahead of time. Both Polymarket and Kalshi host prediction markets where people can bet on the length and content of political speeches and press briefings.

Ocasio-Cortez argued that such a market would be an easy way for her to enrich her associates by letting them know the length of her speeches ahead of time.

"If you are a person with power that can determine outcomes, then you can use that as an avenue for doling out favors," she said.

Amid the insider trading concerns, Kalshi has sought to reassure the public that insider trading is forbidden on the platform, that it tracks suspicious trades, and that it supports Torres's bill. On Thursday, the company announced an expansion of its surveillance and enforcement frameworks, with CEO Tarek Mansour writing on X that the company has initiated over 200 investigations in the last year.

The Coalition for Prediction Markets, a group backed in part by Kalshi, also recently hired former Reps. Sean Patrick Maloney of New York and Patrick McHenry of North Carolina. And last week, the coalition took out a full-page ad in the Washington Post touting support for a ban on insider trading and broader regulation.

Mansour has also been meeting with lawmakers himself. Republican Sen. Tommy Tuberville of Alabama, one of those lawmakers, said he came away intrigued by the industry.

"It's kind of instant polling, is the way I see it. And it's about anything," Tuberville told Business Insider. "I think it's interesting. How long it'll last, I don't know."

By contrast, Polymarket — the platform where the infamous Maduro trade occurred — has stayed relatively quiet, and the company did not respond to a request for comment on this story.

'The gamification of every aspect of human existence'

There are also broader concerns that prediction markets may have a harder time assuaging, including not just the harms that can come with gambling, but also the perception that these markets reduce broad swaths of life to tradable commodities.

"I find something concerning about the gamification of every aspect of human existence," said Democratic Rep. Ro Khanna of California. "We've, as people, become more uncomfortable with the unknowable, and with the mysteries of life, and this is a further step in that direction."

Both Kalshi and Polymarket have pitched themselves as something more noble than mere casinos. To hear them tell it, prediction markets aggregate the collective wisdom of thousands of bettors, making for a valuable source of information about future events.

Torres, who said that he monitored prediction markets during the 2024 election alongside polling, said he could see the potential in that respect.

"I tend to think that polling is reliable, but you could lie to a pollster," Torres said. "If you have skin in the game, if you're risking money, you actually have an incentive for truth-telling."

Others aren't so swayed.

Democratic Sen. Chris Murphy of Connecticut, who recently wrote a lengthy thread on X arguing that prediction markets were contributing to a "dystopian world," said he viewed the platforms as little more than a "scam."

"I have plenty of ways of finding out what the conventional wisdom is," Murphy told Business Insider. "Why do I need a prediction market to do it, if the prediction market is also scamming millions of people out of money?"