A legislative movement is gaining momentum in the US state of New York to ban public officials from trading in prediction markets. This reflects concerns that betting on political and policy information can lead to conflicts of interest and insider trading.
New York State Democratic Representative Rich Torres plans to introduce legislation this week that would prohibit public officials from trading or betting on prediction markets based on information obtained in the course of their duties. Business Insider reports that the bill would comprehensively regulate public officials at the federal level.
The core of the bill is to completely block public officials with access to information from participating in prediction markets. This structure prohibits federal elected officials, appointed officials, and executive branch officials who have access to nonpublic information or who, in the course of their duties, have prior knowledge of information related to specific policies or events from trading in prediction markets.
In the United States, prediction markets targeting political and policy variables such as presidential election results, interest rate decisions, and war and diplomatic events have been growing rapidly. Concerns have been raised that if public officials seek profits by exploiting insider information or policy directions, market fairness and policy credibility could be undermined.
Prediction markets, in particular, have been criticized for being outside the regulatory framework, unlike financial products. Representative Torres' bill represents the first attempt to effectively bring prediction markets into the realm of public official ethics regulation, and is likely to influence future discussions on conflict of interest regulations at the federal level.
Industry insiders predict that if this legislation passes, it will bring significant changes to the composition of prediction market participants and trading practices. At the same time, some predict it could spark discussions on strengthening regulations on public officials' overall participation in virtual assets and derivatives finance.
