Lawmakers are trying to stop staffers from insider trading. Campaign bets still surfaced.
Campaign staffers are making big bucks by betting on their own candidates in prediction markets, a new report by NPR revealed. This comes as lawmakers are trying to ensure insider trading rules will keep others from profiting off of their knowledge.
In one instance detailed by NPR, a campaign staffer was given a tip about an unreleased poll showing that their candidate was up by a lot. This tip didn’t align with the campaign’s internal numbers, but the staffer knew it would shift prediction markets, especially as one had their candidate down by double digits.
“Myself and others started placing bets before that poll came out,” the anonymous staffer told NPR, who verified the prediction market data. “And then, sure enough, as soon as that poll came out, the stock went up and everybody made money.”
This staffer said following this process made them “thousands” of dollars at one point.
A different campaign staffer, also anonymous, said their colleagues bet on outcomes of races they were involved in. This staffer said they didn’t personally use prediction markets, but characterized campaign betting as common, especially in the early 2020s, when fewer people were making wagers.
Jeff Le Riche, who worked at the Commodity Futures Trading Commission as a trial lawyer, said in an interview with NPR that these bets “could potentially be a violation” and subject to a CFTC investigation.
It’s a violation of the Commodity Exchange Act to use material, non-public information, Le Riche noted.
Mondaire Jones, a commissioner on the United States Commission on Civil Rights, agreed, saying on X that “this is illegal insider trading, plain and simple.”
“The CFTC’s rules already prohibit it,” Jones said. “These campaign staffers could get into real trouble.”
However, former CFTC commissioner Kristin Johnson said she doesn’t think the commission “has developed experience and expertise in policing election positions.”
“The commission has not yet tried a series of cases testing the authority, and the courts have not indisputably concluded that insider trading laws apply in one of those contexts, or at least one that’s relevant to the hypothetical you offered,” Johnson told NPR. It will be important for Congress to give the CFTC a clear direction when it comes to political event contracts, she added.
More lawmakers are looking to regulate prediction markets against insider trading, especially after instances such as the one where an armed forces soldier won $400,000 betting on the capture of ousted Venezuelan president Nicolás Maduro. Some pushed back on going after the soldier, calling it hypocritical to punish him for trading on information when Congress has been doing the same thing for years.
The Senate passed a rule in April banning members and staff from betting in prediction markets. Lawmakers are now pushing legislation to prohibit any federally elected official or government employee from using insider information to make wagers.
Some lawmakers in the House of Representatives, including Seth Magaziner, D-R.I. and Seth Moulton, D-Mass., banned their own staffers from participating in prediction markets related to political or legislative outcomes.
“Washington will never work for working people if members of Congress and government officials can profit off their positions,” Magaziner said in a statement.
Democratic lawmakers led by Sen. Jeff Merkley, D-Ore., late last month sent a letter to the CFTC, asking chair Michael Selig to crack down on what they called “the explosion of insider trading on prediction markets,” as well as markets dealing with events such as elections or acts of war.
“Election prediction markets pose a danger to our democracy and elections,” the lawmakers said in the letter. “At a time when dark money and distrust in government are at an all-time high, election contracts commodify our democratic processes and exacerbate civic cynicism.”
Selig said at a House Agriculture Committee hearing in April that the CTFC will find anyone who engages in “fraud, manipulation, or insider trading in any of our markets,” and they will face the full force of the law. The CTFC, though, has filed lawsuits against states that brought legal action against prediction markets.
Popular prediction markets say they have no tolerance for insider trading. Kalshi recently suspended and fined three political candidates who bet on their own races.
Still, with few regulations on new markets, “unless the federal government makes a change … it’s kind of going to continue to be the Wild West, in all honesty,” the unnamed staffer who spoke to NPR said.
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Ella Rae Greene, Editor In Chief
