Crypto Prediction Markets Become a $150 Billion Gambling Den: US Congress Introduces Strong Regulatory Bill to Protect National Security and Election Integrity

As of May 22, 2026, the era of 'betting on everything' that existed in a regulatory blind spot is coming to an end in Washington. As the combined trading volume of platforms like Polymarket and Kalshi exceeded $150 billion, a bipartisan coalition in the US Congress has begun moves to dismantle them. Lawmakers are citing 'statistically impossible' win rates and significant risks to election integrity and national security, which are clearly evident in indicators visualizing recent rapid market growth.

A report from Bubblemaps released on May 21, 2026, raised serious questions about the transparency of prediction markets. An investigation team led by Nicolas Vaiman discovered 80 betting cases on Polymarket with a 98% win rate, concluding that these are difficult to view as the result of mere luck or analysis.

The findings of the Bubblemaps investigation show that prediction markets have devolved from simple aggregators of information into manipulated gambling dens.

The report pointed out that such win rates are statistically unattainable and that it is highly likely anonymous wallets are manipulating the market using insider information. Despite the massive market size of $150 billion, the abnormal success of a specific few wallets is fundamentally shaking the market's credibility. This data served as a decisive basis for Congress to define prediction markets as a national security risk rather than a simple financial product.

S. 4060: Prediction Market Security and Integrity Act

S. 4060, the 'Predictive Market Security and Integrity Act of 2026' introduced in the U.S. Senate, is a key legislative tool to prevent such market manipulation. This bill prohibits prediction market trading using material non-public information (MNPI) and aims to outlaw deceptive acts that substantially interfere with or predetermine event outcomes. Among several regulatory proposals submitted to Congress, this bill contains the strongest penalties for acts that undermine market integrity.

• The bill introduced by Senator Jeff Merkley and Representative Jamie Raskin on March 26, 2026, completely bans betting on elections, sports, war, and government activities.
• They argue that turning sensitive national security events into gambling products undermines the foundation of democracy.
• In particular, there are significant concerns that betting on the course of a war or government decision-making could exert undue pressure on the policy-making process.
• The bill is part of a strategy to prevent prediction markets from being degraded into tools that prioritize private interests over the public interest.

The issue of insider trading extends to government officials. A bill introduced on March 25, 2026, by Representative Adrian Smith and Representative Budzinski includes provisions prohibiting members of the U.S. Congress and federal employees from trading in prediction markets. The Center for American Progress (CAP) emphasized that basic information such as the name, age, and contact information of individuals placing bets must be mandatorily collected to prevent corruption in prediction markets, warning against those in power profiting behind a veil of anonymity.

Intelligence authorities warn that crypto prediction markets are expanding the 'attack surface' for foreign election interference. Past instances where the Russian Main Intelligence Directorate (GRU) used virtual assets to spread disinformation and support hacking during the 2016 U.S. presidential election are being re-examined. As of 2026, Congress is taking seriously the possibility that blockchain-based prediction markets could be utilized as a new tool by countries like Russia to disrupt democratic processes.

The shift in market leadership is also noteworthy. In 2025, Polymarket enjoyed 20 times more popularity than Kalshi, but entering 2026, Kalshi overtook Polymarket in trading volume. Kalshi dominated the market with the advantage of being able to operate legally within the United States and a strategy to attract professional investment firms and funds. In response to regulatory pressure, both platforms announced self-regulatory measures to curb insider trading on March 23, 2026, but the legislative body's gaze remains cold.

Enforcement or Total Ban: The Future of Prediction Markets

Not all members of Congress are calling for a total ban. On April 14, 2026, Representative Blake Moore proposed the 'Event Contract Enforcement Act,' offering a compromise that protects legitimate business interests while ensuring market integrity. This is an attempt to recognize the information aggregation function of prediction markets while ensuring they operate only within strict guidelines.

Currently, CFTC Chairman Michael Selig is pushing for the establishment of new rules for prediction markets. This process, which began in January 2026, is expected to be a watershed moment determining whether prediction markets will be integrated into the financial system or disappear into history for national security reasons. As Washington's legislative clock ticks rapidly, crypto prediction markets face a legal battle for their very existence.