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New York Representative Ritchie Torres has officially introduced a new piece of legislation titled the Public Integrity in Financial Prediction Markets Act of 2026. This legislative effort is currently backed by a coalition of more than 30 other Democrats within the House of Representatives, signaling a significant level of support for the measure among party members. The primary objective of the bill is to establish strict boundaries for federal personnel who might otherwise participate in prediction markets while holding positions of public trust. The introduction of this act marks a concerted effort to address perceived corruption risks in Washington.
The proposed act would prohibit a wide range of individuals from engaging in the buying, selling, or exchanging of prediction market contracts. This prohibition specifically applies to federal elected officials, political appointees, and employees within the Executive Branch. Furthermore, congressional staff members would also be barred from these activities. The restrictions are designed to trigger when these individuals possess material nonpublic information or when they could reasonably obtain such sensitive data through the performance of their official duties. The bill targets contracts that are tied to government policy, government action, or political outcomes.
According to Representative Torres, the intersection of prediction markets and the federal government represents a sector where insider trading and self-dealing are demonstrated dangers. By introducing this act, the proponents aim to ensure that those in positions of power cannot utilize their access to nonpublic data to gain a financial advantage. Torres emphasized that no official is elected to profit from their office, and ignoring this plain-sight corruption could lead to significant peril for the integrity of government operations.
Context
The introduction of the Public Integrity in Financial Prediction Markets Act of 2026 follows a specific high-profile event on the decentralized prediction platform Polymarket. An unknown user recently netted approximately $400,000 on a bet specifically related to the removal of then-Venezuelan President Nicolás Maduro. This particular transaction has raised significant alarms regarding the potential for insider trading and the use of nonpublic information to benefit from political outcomes. The bet, which netted the unknown user a significant return, raised concerns over how such platforms could be exploited by those with prior knowledge.
Details of the trade indicate that a Polymarket account placed a $32,000 bet on a contract predicting that Maduro would be removed from power by a deadline of January 31. The success of this prediction and the resulting large payout fueled concerns regarding potential self-dealing within the government. Representative Torres signaled that allowing an elected official to use platforms like Polymarket or Kalshi could incentivize him to personally push policies that line his pockets. He noted that there is reason to fear that certain officials could use crypto and prediction markets to enrich themselves and their families.
The bill serves as a direct response to these types of market activities by targeting contracts tied to government action. By focusing on instances where officials possess material nonpublic information or could reasonably obtain it through their official duties, the legislation aims to close a perceived loophole. This move is intended to ensure that the intersection of prediction markets and the federal government does not become a hub for corruption, where insider trading is a demonstrated danger rather than just an imagined risk.
Impact
The Public Integrity in Financial Prediction Markets Act of 2026 enters the legislative arena at a time when several other major crypto-related bills are also moving through Congress. For instance, the House of Representatives previously passed the CLARITY Act in July. In the Senate, lawmakers are considering the Responsible Financial Innovation Act, which is expected to be one of the most comprehensive pieces of legislation to ever affect the cryptocurrency industry. These bills represent a broad effort to modernize the regulatory framework for digital assets and ensure the industry operates under clear federal guidelines.
One of the core impacts of this legislative push is the proposed change to the regulatory roles of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). By redefining how these agencies oversee various market segments, the bills aim to provide a more stable and predictable environment for both market participants and regulators. This shift is particularly relevant as prediction markets continue to grow in popularity and influence within the broader financial ecosystem, requiring a more nuanced approach to oversight and enforcement.
The introduction of Torres’ bill adds a specific ethical layer to this regulatory overhaul. While the Responsible Financial Innovation Act and the CLARITY Act focus on market structure and innovation, the new proposal targets the personal conduct of federal officials. If passed, it would establish a new standard for public integrity by explicitly linking the use of nonpublic government information to prohibitions on prediction market participation. This reflects a growing consensus on the need for comprehensive rules that address both the technological and ethical aspects of digital asset trading.
Outlook
As the Public Integrity in Financial Prediction Markets Act of 2026 begins its progression, the next major steps for related legislation will take place in the Senate. Senate Banking Committee Chair Tim Scott has announced that the committee will hold a markup session for the market structure bill this coming Thursday. This markup is a vital step in the legislative process, as it allows committee members to debate and potentially advance the bill to a full floor vote in the Senate. The outcome of this session will be a key indicator of the Senate’s commitment to passing reform.
The upcoming Thursday session will be closely watched by industry stakeholders, as it may determine the momentum for digital asset legislation for the remainder of the session. The Responsible Financial Innovation Act remains a focal point for those seeking comprehensive regulatory clarity in the Senate. The advancement of these bills could significantly alter the landscape for the crypto industry by clarifying the jurisdictional boundaries between the SEC and the CFTC, which has been a long-standing point of contention for market participants and regulators alike.
The future of Representative Torres’ bill will likely depend on how it is integrated with these broader market structure efforts. With the backing of more than 30 House Democrats, the proposal has a foundation of support, but its passage would require navigating the complexities of both chambers. If the markup is successful, it represents a major step toward finalization for the broader market structure bill. For now, the focus remains on the Senate Banking Committee’s actions and whether the proposed changes to agency roles will finally gain enough traction to become law.
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