Insider traders are getting caught. It's still not enough for prediction market critics.

• Insider traders on both Kalshi and Polymarket have been caught recently.
• But the prediction market industry's critics on Capitol Hill still say they want a crackdown.
• AOC said that enforcement actions were being taken to "preempt any federal action."

If you thought nabbing a few insider traders would quell politicians' concerns about prediction markets, think again.

"I don't think it's enough," Democratic Rep. Alexandria Ocasio-Cortez of New York said. "I think there's a lot of work that we have to do on prediction markets."

Last month saw several high-profile cases of prediction market insider traders getting caught. Three congressional candidates were fined and suspended from Kalshi for betting on their own elections, while the Department of Justice indicted a US Army soldier who was involved in the raid on Venezuelan President Nicolás Maduro for using classified information to make more than $400,000 on Polymarket.

In both instances, the prediction market companies played a key role: Kalshi levied the fines for violations of their own rules, while Polymarket flagged the Maduro trade to US authorities.

Yet even as the companies aim to demonstrate that they take insider trading seriously, the burgeoning industry's loudest critics on Capitol Hill remain unassuaged.

"These prediction markets serve no legitimate function. There is no reason that they should exist," said Democratic Sen. Chris Murphy of Connecticut. "Thus, it's a stupid approach to try to find all the bad actors when there's no reason to have the market in the first place."

Proponents of prediction markets argue that they offer useful services, including financial hedging and the ability to tap into the wisdom of the crowd for forecasting. But many see them as essentially a form of gambling.

Insider trading has perhaps been the biggest concern, given that many markets involve trading on questions and events where some individuals may already know the outcome.

Kalshi has moved to preemptively block politicians and athletes from trading in politics and sports markets, while Polymarket has beefed up its market integrity rules and partnered with companies like Palantir and Chainalysis to flag suspicious trading activity.

And in line with those concerns, particularly around trading on government actions, the Senate unanimously passed a resolution banning senators and their staff from trading on prediction markets — a move that both Kalshi and Polymarket publicly applauded.

But at this point, the problem for prediction market companies is that their critics in Washington — and in state capitols — have concerns that go beyond insider trading. In many cases, lawmakers view the mere existence of the markets as objectionable.

Murphy and Democratic Rep. Greg Casar of Texas have co-authored a bill that would ban all sorts of prediction markets, including those based on the Oscars or the Super Bowl halftime show.

"I mean, we just shouldn't have gambling around issues of war and peace," Casar said, adding that the Maduro trade wouldn't have happened "in the first place, if we just went back to this not being allowed."

Kalshi does not offer prediction markets on war because it's subject to US regulations. Polymarket, on the other hand, is an international platform that includes such markets. Americans are officially prohibited from using the international platform, and the company is rolling out a US-based platform that remains invite-only. But in practice, many Americans use VPNs to trade on Polymarket.

There's also the ongoing legal battle with states over whether sports markets should count as sports betting, and thus be subject to state laws and regulations.

Kalshi and Polymarket maintain that what they offer is not gambling but trading, and the Trump administration has signaled its agreement. Still, plenty remain unconvinced.

"It's flat-out online gambling. And states, if they don't want to do online gambling — my state doesn't — should not have to do online gambling," Republican Rep. Blake Moore of Utah said. "The loophole should not exist there."

The companies themselves are also still dealing with suspicion from lawmakers, even as they crack down on insider trading.

Ocasio-Cortez said that the recent enforcement actions by Kalshi against the trio of congressional candidates were simply done "in order to preempt any federal action" against the platforms.

"This is a classic cycle," Ocasio-Cortez said.