The House Oversight Committee is now looking directly at whether prediction market users have been trading on nonpublic government information. Polymarket and Kalshi have until June 5 to explain how they police identity checks, geographic restrictions, and suspicious trading.
The prediction market boom has reached a familiar point in the financial cycle: Washington wants to know who knew what, when they knew it, and whether they made money from it. Chairman James Comer has opened an investigation into Polymarket and Kalshi after a string of alleged insider trading cases raised doubts about whether event contracts can stay clean as they move deeper into politics, war, and government decisions.
According to CNBC, Comer is seeking documents from Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour by June 5. The requests focus on user verification, location controls, trading surveillance, and the steps each company takes when activity looks suspicious. That matters because prediction markets have spent years selling themselves as useful information tools. If people with classified briefings, campaign access, or private production schedules can quietly trade before the public knows what is happening, the product starts to look less like forecasting and more like a leak monetization machine.
Comer has also raised the prospect of barring members of Congress, federal employees, and administration officials from using these platforms. That would be a major change for an industry that has benefited from political attention and mainstream media partnerships. It would also send a clear signal to founders building in crypto or fintech: event contracts are no longer being treated as a novelty. They are being judged against the same basic market integrity questions that apply to equities, commodities, and derivatives.
The cases that put prediction markets under pressure
The most serious case involves U.S. Army Master Sergeant Gannon Ken Van Dyke. Federal prosecutors and the CFTC allege that Van Dyke used sensitive nonpublic information about Operation Absolute Resolve, a military operation to capture former Venezuelan President Nicolás Maduro, to trade on Polymarket. The CFTC complaint says he bought more than 436,000 yes shares in a Maduro contract at a cost of about $32,538 and realized more than $404,000 in profits after the contract resolved in his favor.
The Justice Department charged Van Dyke in April, while the CFTC filed a parallel civil action that framed the trading as fraud in event contracts. That point is important. Regulators are not simply asking platforms to improve moderation. They are asserting that insider trading rules can reach these markets when a trader uses confidential information for personal gain. For investors backing prediction market startups, that moves the risk from theoretical to concrete.
Polymarket has faced broader scrutiny as well. Reporting by The New York Times and other outlets has highlighted suspiciously timed trades tied to geopolitical events, including bets placed before public reports of military action. Some of those allegations remain under investigation, and they should be treated carefully. But the pattern is enough to explain why Congress is paying attention. A market tied to national security events creates incentives that look very different from a market about an earnings call or a sports result.
Kalshi has had a different but still damaging set of problems. The company has suspended and fined congressional candidates who traded on their own races, a direct conflict with its rules. It also disciplined an employee connected to MrBeast content for betting on outcomes of videos before viewers knew the result. These are smaller cases than a classified military operation, but they point to the same weakness: when someone has private information about an event, a liquid market gives them a way to cash in.
Compliance is becoming the real product
The document requests go to the heart of the business model. Polymarket has grown through crypto-native infrastructure and global access, which makes it fast and liquid but harder to monitor through traditional financial channels. Kalshi, by contrast, has leaned on its status as a CFTC-regulated exchange and does not offer anonymous trading in the same way. The Oversight probe suggests both models will face tougher questions, just from different directions.
For Polymarket, lawmakers are likely to focus on how it blocks restricted users, traces wallet activity, and identifies traders who may be connected to government information. For Kalshi, the issue is whether a regulated platform can scale quickly while still catching conflicts before they damage trust. The company has self-reported some violations and taken disciplinary action, which helps its case. It does not end the scrutiny.
The timing is also difficult for the industry. Since early 2026, lawmakers have introduced multiple bills aimed at prediction markets, including proposals that would restrict trading by public officials or ban contracts tied to elections, war, terrorism, and government action. Minnesota has already tried to ban prediction markets at the state level, prompting a CFTC lawsuit over federal authority. That wider fight means the Comer investigation is not an isolated headline. It is part of a larger attempt to decide whether these markets are financial products, gambling products, or something that needs a more specific rulebook.
The immediate test is June 5. If Polymarket and Kalshi satisfy the committee, the industry may get a chance to tighten controls before Congress writes new limits into law. If the responses look thin, subpoenas and legislation become more likely. Either way, the startup lesson is straightforward: identity verification, trade surveillance, conflict rules, and cooperation with regulators are no longer back-office details. In prediction markets, they are becoming the core of the business.
