House Republicans Open Investigation Into Kalshi, Polymarket Over Insider Trading

In brief

• House Republicans opened an insider trading probe into Kalshi and Polymarket over insider trading.
• Rep. James Comer requested records tied to suspicious trades, KYC rules, and Iran- and Venezuela-related wagers.
• The investigation follows recent scandals involving alleged insider bets on U.S. military actions.

The leader of the powerful House Oversight Committee announced Friday he has launched an investigation into prediction market juggernauts Kalshi and Polymarket.

The investigation will focus on insider trading by users on both platforms, and wagers that leverage non-public information, Committee Chair James Comer (R-KY) said.

“This growing pattern of insider trading activity on prediction market platforms indicates that Congressional action may be necessary,” the congressman said.

Comer sent letters to Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan on Friday, requesting a slew of documents related to both companies’ internal operations.

The requested information includes all documentation and communications related to the companies’ know-your-customer (KYC) standards; their policies and procedures for detecting suspicious trades; their analysis of the impact of insider trading scandals on the company’s reputation; and their deliberations regarding the offering of wagers tied to armed conflicts, among other subjects.

Comer has also asked Kalshi and Polymarket to hand over all internal communications and documents related to wagers on the Iran war and America’s attack on Venezuela earlier this year.

The investigation comes weeks after a U.S. soldier was arrested for allegedly placing Polymarket bets on the timing of American military actions using classified information. The day prior, Kalshi fined multiple U.S. politicians for betting on the outcomes of their own elections.

Comer appears to have also been compelled by a New York Times investigation which last week identified over 80 instances of potential insider trading on Polymarket.

In recent months, Kalshi and Polymarket have come under scrutiny from lawmakers concerned by the prospect of rampant insider trading in the novel and lucrative prediction market sector. Last month, the Senate unanimously passed a resolution banning its own members and staff from trading on prediction markets.

In response to the pushback, both companies have taken strides to assure regulators that they are actively rooting out insider traders on their platform. But such assurance could prove to be a double-edged sword.

“If they can catch this guy, why can't you catch another?” Dan Boyle, a partner at Boies Schiller Flexner and a former federal prosecutor focused on gambling-related fraud, told Decrypt, speaking of lawmakers’ potential concerns.

“If their position was ‘We just don't have the ability to catch some of these issues,’ that would be one position,” Boyle continued, speaking of prediction market platforms. “But they're making a push to show they have the [detection] technology, and they are able and willing to use it.”

Unlike various requests made by Democratic lawmakers in the last year to investigate crypto firms, the House’s prediction market investigation is backed by Republican committee leadership. As the majority party in the House, the GOP leadership on the House Oversight Committee likely has the votes to issue legally binding subpoenas.

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