Federal Officials Banned from Trading Prediction Markets: New Ethics Bill Targets Insider Betting on Government Actions

The Public Integrity in Financial Prediction Markets Act of 2026 is here to draw a clear line in the sand: if you work for the federal government and have access to the playbook, you can’t bet on the game. Specifically, Section 2 makes it illegal for federal officials, including elected reps, congressional staff, political appointees, and Executive agency employees, to buy, sell, or exchange a “Prediction Market Contract” if they have relevant nonpublic information. The bill defines these contracts broadly as financial instruments tied to the outcome of a future event, including market-based event contracts related to government policy or political outcomes.

The New Rules of the Game

Think of this as a major update to insider trading rules, tailored for the digital age and emerging financial tools. Currently, insider trading focuses on traditional stocks and securities. This bill expands that ethical fence to cover prediction markets—those platforms where you can essentially bet on things like whether a certain piece of legislation will pass, or if a specific regulatory action will be taken. If you’re a staffer who knows the SEC is about to drop a major ruling on crypto, this bill says you can’t use that nonpublic knowledge to profit in a market betting on that outcome.

Who’s Covered and What’s Off-Limits

The prohibition is sweeping, hitting everyone from the person who answers the phones on Capitol Hill to high-level political appointees. The key is the “Covered Transaction”: buying or selling a contract specifically related to a government policy, action, or political outcome. This isn't about banning officials from trading all financial products; it’s about preventing them from monetizing their unique insight into government decisions. For example, a contract betting on the outcome of a presidential primary? Off-limits if you’re a campaign advisor with inside information. A contract betting on whether the Department of Energy greenlights a specific pipeline? Also off-limits if you’re an employee working on that exact regulatory review.

The “Reasonably Obtain” Clause: Where Things Get Fuzzy

Here’s the part that policy wonks will be debating: the bill prohibits trading not only if the individual possesses material nonpublic information, but also if they “may reasonably obtain such information in the course of their official duties.” This is a preventative measure designed to catch people who try to claim ignorance, but it also creates a massive gray area. For a busy federal employee, it means they have to constantly assess not just what they know, but what they could know. It’s a high ethical bar, ensuring that the integrity of these markets—and the public’s trust—isn't compromised by someone who could easily look up the winning information on their work computer.

Why This Matters to Everyone Else

While this bill directly impacts federal officials and the prediction market platforms they trade on, the real benefit is to public trust. When officials can secretly profit from government actions—even in niche markets—it fuels cynicism and the belief that the system is rigged. This legislation attempts to close that loophole, ensuring that government decisions are made based on public interest, not private financial gain. It's a move toward modernizing ethics rules to keep pace with the ever-evolving landscape of financial instruments and online betting.