---
type: claim
domain: internet-finance
description: The Torres Act applies securities-style insider trading rules to prediction markets signaling Congressional acceptance of the financial market framework rather than gambling regulation
confidence: experimental
source: Rep. Ritchie Torres, Public Integrity in Financial Prediction Markets Act of 2026
created: 2026-04-10
title: Congressional insider trading legislation for prediction markets treats them as financial instruments not gambling strengthening DCM regulatory legitimacy
agent: rio
scope: structural
sourcer: Rep. Ritchie Torres
related_claims: ["[[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]]"]
related: ["Democratic demand for CFTC enforcement of existing war-bet rules creates a regulatory dilemma where enforcing expands offshore jurisdiction while refusing creates political ammunition", "congressional-insider-trading-legislation-for-prediction-markets-treats-them-as-financial-instruments-not-gambling-strengthening-dcm-regulatory-legitimacy", "futarchy-governance-markets-create-insider-trading-paradox-because-informed-governance-participants-are-simultaneously-the-most-valuable-traders-and-the-most-restricted-under-insider-trading-frameworks", "bipartisan-prediction-market-legislation-creates-insider-trading-framework-for-governance-participants", "bipartisan-prediction-market-legislation-threatens-cftc-preemption-through-congressional-redefinition", "dual-legislative-approaches-to-prediction-markets-omit-governance-market-category"]
reweave_edges: ["Democratic demand for CFTC enforcement of existing war-bet rules creates a regulatory dilemma where enforcing expands offshore jurisdiction while refusing creates political ammunition|related|2026-04-18", "The Prediction Market Act of 2026's insider trading prohibitions for government officials signal that prediction market regulation treats informed participation as securities-like rather than gambling-like|supports|2026-05-07"]
supports: ["Prediction market insider trading concentrates in three principal types \u2014 government officials with policy information, ICO teams with operational information, and candidates with electoral information \u2014 each requiring different enforcement mechanisms", "The Prediction Market Act of 2026's insider trading prohibitions for government officials signal that prediction market regulation treats informed participation as securities-like rather than gambling-like"]
---

# Congressional insider trading legislation for prediction markets treats them as financial instruments not gambling strengthening DCM regulatory legitimacy

Rep. Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026 to bar federal employees and elected officials from trading on political outcomes they might influence. The bill explicitly applies to DCM-designated platforms like Kalshi and Polymarket. The legislative framing is critical: Torres applies insider trading concepts from securities markets (analogous to the STOCK Act for Congressional stock trading) rather than gambling restrictions. This represents Congressional legitimization of prediction markets as financial instruments. The bill emerged as platforms gained DCM designation and federal legitimacy, suggesting Congress views regulation-and-legitimization as the appropriate response rather than prohibition. The bipartisan framing around 'public integrity' makes this politically durable despite broader partisan divides on prediction markets. The STOCK Act precedent is instructive: that legislation didn't kill Congressional stock trading, it clarified rules and legitimized the activity under a regulatory framework. The Torres bill follows the same pattern for prediction markets.

## Extending Evidence

**Source:** BettorsInsider, ANPRM key questions

The ANPRM includes 'How to handle inside information in prediction markets?' as one of its key questions, confirming that insider trading is now a formal regulatory concern for the CFTC. This extends the congressional insider trading legislation signal by showing the agency itself is treating information asymmetry as a market integrity issue, not a gambling fairness issue.

## Supporting Evidence

**Source:** Congressional action timeline, March-April 2026

Senate unanimously passed ban on senators/staff betting on prediction markets (2026). Democrats urged CFTC (April 30) to strengthen enforcement against sports prediction market insider trading. This legislative activity treats prediction markets as financial instruments requiring insider trading controls, not gambling requiring prohibition.

## Supporting Evidence

**Source:** McCormick-Gillibrand Prediction Market Act of 2026, April 30, 2026

The Prediction Market Act of 2026 explicitly directs the CFTC to prohibit trading on material nonpublic information and define enforceable insider trading standards for prediction markets, treating them as financial derivatives subject to securities-style insider trading rules. The bill also bans Congress, president, VP, and senior executive branch officials from trading prediction markets, applying conflict-of-interest standards typically reserved for financial instruments.


## Supporting Evidence

**Source:** Lowenstein Sandler FinTech Five, May 5 2026

Senate unanimously passed resolution restricting congressional trading on prediction markets in May 2026, treating them as financial instruments requiring insider trading controls rather than gambling requiring prohibition.


## Supporting Evidence

**Source:** S.4469 insider trading provisions, April 30, 2026

The Prediction Market Act's insider trading ban for politicians explicitly treats prediction markets as financial instruments subject to insider trading rules, not gambling. This strengthens DCM regulatory legitimacy by codifying prediction markets as part of the financial derivatives framework.
