US Congress to Launch Investigation, Anticipating the Emergence of Insider Trading Issues in Prediction Markets

The US House Committee on Oversight and Government Reform announced on May 23rd that it had officially launched an insider trading investigation into the prediction market platforms Polymarket and Kalshi. In his letter to the CEOs of both companies, the Committee Chairman and Republican, James Comer, used strong wording, stating that "the growing pattern of insider trading activities on prediction market platforms suggests that congressional action may be necessary."

The core concerns of the investigation focus on three levels: how the two platforms verify the identities of account holders domestic and abroad, how they monitor trading activities, and how they enforce geographic restriction regulations. This means that the regulatory perspective has extended beyond market manipulation itself to include user access and cross-border compliance issues.

Both companies have pledged to cooperate with the investigation. Kalshi spokesperson Elisabeth Diana said the company is "proud" of its insider trading protection system and looks forward to discussing the relevant systems and processes with the committee. A Polymarket spokesperson emphasized that the platform "maintains a robust market integrity framework" and claimed that it leads the industry in terms of transparency.

The timing of this investigation is quite sensitive. Prediction markets have recently gained rapid popularity and user base and trading volume have surged due to the accuracy of their predictions in significant events such as the US elections and policy directions, but concerns about information asymmetry and insider trading have also increased. The formal intervention at the congressional level marks the industry, which previously operated in a regulatory grey area, as now officially entering the scope of strong regulation.

For investors and industry participants, two points need to be closely monitored in the follow-up: first, whether the documents requested by the committee can reveal internal compliance loopholes within the platforms; and second, whether Congress will advance legislation to impose mandatory requirements on the eligibility, information disclosure, and transaction monitoring of prediction markets.