A U.S. lawmaker has introduced legislation that would impose penalties of at least $10,000 on federal candidates who trade prediction market contracts tied to their own elections.
Summary
- Rep. Don Davis has introduced a bill barring federal candidates and certain family members from trading contracts tied to their elections.
- Violations would carry a $10,000 civil penalty or three times the net financial gain, whichever is higher.
- The bill arrives after Kalshi suspended Davis’ Republican opponent, Laurie Buckhout, for trading contracts connected to her congressional race.
- Congress is not expected to take up the proposal before the Nov. 3 midterm elections.
According to an Oct. 5 announcement from Rep. Don Davis, D-N.C., the No Betting on Your Own Race Act would prohibit federal candidates, their spouses, dependent children and authorized campaign committees from buying, selling or holding certain election-related event contracts.
The proposed restrictions would apply to contracts based on whether a candidate wins an election, remains in a race, or achieves a particular vote share, margin, or placement. The legislation also covers contracts connected to primaries, caucuses, conventions and other nomination contests.
Under the bill, a violation would carry a civil penalty of $10,000 or three times the net financial gain linked to the transaction, whichever is higher.
“We don’t want our athletes to bet on their games. A candidate running for federal elected office should be treated exactly the same and should not be allowed to trade on their own election,” Davis said.
Davis said the proposal is intended to prevent market interference and insider trading while stopping candidates and family members from “cashing in” on their elections.
Election betting bill would also cover indirect trades
Rather than limiting the prohibition to contracts purchased directly by candidates, the legislation extends the restriction to certain trades conducted through other people.
Under the proposal, a candidate could violate the rule by directing or requesting another person to acquire or dispose of a covered contract. Knowingly providing money for another person to obtain an interest in such a contract could also fall within the prohibition.
The Federal Election Commission would be required to maintain a free, machine-readable list of federal candidates and update the database at least once each week. Candidates would also have to be informed about the trading restriction when filing for federal office.
Prediction market operators and brokers would not face penalties simply for facilitating a prohibited transaction. The bill would provide protection for platforms taking good-faith measures to close accounts, void or unwind trades, and report suspected violations to the CFTC, Department of Justice or FEC.
If someone already held an election contract before becoming a federal candidate, the proposal would allow time to dispose of the position under the trading platform’s minimum divestment period.
While the bill does not single out Kalshi or Polymarket by name, its definition of political event contracts would apply to products of the type offered on prediction markets.
The legislation follows earlier attempts in Congress to restrict elected officials from trading such products. In June, crypto.news previously reported that House Administration Committee Chair Bryan Steil was working to add prediction market restrictions to H.R. 7008, a congressional stock-trading proposal.
Steil said at the time that members of Congress should not trade contracts linked to elections or public policy outcomes. H.R. 7008 would separately restrict lawmakers and immediate family members from buying individual stocks and require advance disclosure of planned stock sales.
Kalshi penalty put candidate trading under scrutiny
Davis’ legislation comes after Kalshi disciplined Laurie Buckhout, the Republican candidate challenging him in North Carolina’s 1st Congressional District.
In August, Kalshi suspended Buckhout for three years after finding that she had purchased less than $1,000 worth of contracts tied to her own congressional race. The exchange also imposed a $2,589.96 financial penalty.
“I bet on myself. Literally,” Buckhout said after the disciplinary action. “It was a dumb mistake, and as soon as I learned there was an issue, I worked to make it right.”
Kalshi’s rules treat political candidates as people capable of directly influencing the outcome of their races and restrict them from trading contracts linked to those contests. Buckhout cooperated with the platform’s investigation.
Earlier in 2026, Kalshi also suspended three congressional candidates for five years after determining that they had traded contracts connected to their own races.
Congressional interest in the issue predates the Buckhout case. House lawmakers have examined whether people with access to nonpublic information could gain an advantage by trading event contracts whose outcomes they can influence.
Prediction markets face more attention in Washington
Questions about candidate trading form one part of the U.S. debate over prediction markets, with lawmakers also examining market integrity, consumer protection and the regulatory treatment of different types of event contracts.
On Sep. 23, all 11 Democrats on the Senate Banking Committee called for a hearing on prediction markets after Republican committee members met with Kalshi CEO Tarek Mansour.
The senators asked Chair Tim Scott to hold a public hearing where the full committee could examine the products and their effects on consumers and the financial system. Their letter also raised questions about contracts tied to corporate performance, which the lawmakers said could potentially qualify as security-based swaps under SEC rules.
The CFTC has separately focused on contracts that could be influenced by people with direct control over an outcome. Agency staff have warned exchanges about markets based on what a named person says, attends or does, asking operators to explain how they detect misuse of nonpublic information and identify people capable of influencing settlement.
Kalshi, meanwhile, has continued seeking federal approval for new trading structures. In September, the company filed for approval of a margin framework covering eligible event contracts, including products tied to political, economic, financial and commercial events.
The proposed system would allow qualified participants to post margin rather than fully fund the maximum potential loss of an eligible position upfront. Sports contracts would remain outside the framework, while access would be limited to participants trading through registered futures commission merchants or approved self-clearing members.
Bill cannot take effect before the 2026 midterms
Davis introduced the No Betting on Your Own Race Act during a pro forma House session, leaving little time for congressional action before voters head to the polls.
The House is not expected to resume regular voting until Nov. 9, six days after the Nov. 3 midterm elections. The Senate is also out of regular session until after the election.
Even if lawmakers later approve the proposal, its restrictions would apply to conduct occurring from the date the legislation becomes law rather than retroactively covering trades made during the current election cycle.
Political event contracts remain available during the 2026 campaign. Kalshi currently lists markets tied to control of the House and Senate, individual congressional races, and other U.S. political outcomes.
