(CNN) — The White House recently warned staff not to engage in insider trading on prediction markets and other platforms, according to a White House official.
The internal warning came amid a flurry of controversial trades on prediction sites and in oil futures markets, mostly related to the Iran war. There isn’t public evidence linking White House officials to these trades, but lawmakers have raised concerns of government insiders possibly cashing in.
The March 24 White House memo cited press reports that “raised concerns” about government officials “using nonpublic government information to place wagers,” according to a source who received the emailed memo. The email reminded staffers that it is a “criminal offense for anyone to use nonpublic information to buy or sell these contracts,” and that it also violates federal ethics regulations, the source said.
“All White House employees are reminded that the misuse of nonpublic information by government employees for financial benefit is a very serious offense and will not be tolerated,” the email added, according to the source.
In response to CNN’s questions about the memo, White House spokesman Davis Ingle said in a statement, “All federal employees are subject to government ethics guidelines that prohibit the use of nonpublic information for financial benefit. However, any implication that Administration officials are engaged in such activity without evidence is baseless and irresponsible reporting.”
The Wall Street Journal first reported about the White House memo.
The memo specifically mentioned Kalshi and Polymarket, which are the most popular prediction sites, with billions of dollars in weekly trading volume. (CNN has a partnership with Kalshi and uses its data to cover major events. However, editorial employees are prohibited from participating in prediction markets.)
Kalshi is federally regulated in the US and, therefore, doesn’t offer markets directly about war. However, its markets about the tenure of Iran’s supreme leader drew considerable scrutiny, leading to large refunds and civil lawsuits.
Polymarket’s US-regulated site isn’t fully operational yet, so its Iran-related markets are on its international site, unfettered by US rules. Experts have repeatedly flagged potential insider trading on the site, with well-timed bets about the war. And the company apologized last week for briefly offering markets on the fate of US service members who were shot down over Iran.
The Trump administration has been largely supportive of prediction markets.
The Trump-appointed chair of the Commodity Futures Trading Commission, which regulates prediction sites, has said he wants to “allow them to flourish.” The new chair, Michael Selig, withdrew Biden-era proposals to ban prediction markets on sports and elections. And the CFTC recently sued states that want to crack down on these platforms, with Selig arguing that only federal regulations, and not state gaming laws, should have jurisdiction over the sites.
This year, lawmakers on Capitol Hill have proposed more than a dozen bills to further regulate prediction markets, including stiffening rules against insider trading by government officials, members of Congress, and their staff.
Some of these bills are bipartisan. Many of the Democrats involved in these bills have framed these proposals as a way to crack down on what they call “corruption” within the Trump administration, though they have not provided public evidence connecting any Trump officials to specific bets.
The-CNN-Wire
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