Comer launches Congress probe into insider trading on Kalshi, Polymarket

House Oversight and Government Reform Committee chairman R-Ky. Rep. James Comer announced Friday on CNBC’s “Squawk Box” that he had asked Kalshi and Polymarket CEOs for information about their efforts to curb insider trading on their platforms.

Comer’s investigation is the latest in a series of congressional attempts to rein in the platforms.

“Internal records maintained by prediction market platforms are the only way bad actors can be identified and the platforms are meeting their legal obligations,” Comer wrote in a letter sent Friday to Polymarket CEO Shayne Coplan and seen by CNBC. he wrote. A similar letter, also seen by CNBC, was sent to Kalshi CEO Tarek Mansour on Friday.

Comer’s letter continues: “The Committee therefore requests documents and information to better understand how Polymarket implements identity verification for domestic and international account holders, enforces geo-restrictions, and detects anomalous trading activity to prevent insider trading on the global platform.”

Prediction markets such as Kalshi and Polymarket have grown in popularity and come under increasing scrutiny from federal and state lawmakers and regulators. It allows users to bet on the outcomes of specific events in a variety of areas, including sports games, elections, awards shows and government actions.

Kalshi is headquartered in New York and Commodity Futures Trading Commission. It does not allow users to bet anonymously; this is a controversial feature of some other platforms operating outside the US, including Polymarket.

Although Polymarket also has offices in the United States, it is a blockchain-based platform operated by a licensed entity in Panama. It has a limited range of US products that are regulated by the CFTC, but its international operations are not overseen by US regulators.

Both companies said earlier this year they would strengthen their own rules on insider trading after a series of questionable trades became public.

Last month, a U.S. soldier was arrested for allegedly using inside information to place bets at Polymarket on the ouster of former Venezuelan leader Nicolas Maduro in January, netting nearly $400,000.

According to a recent report, more than 80 Polymarket users made bets with questionable characteristics, including transactions made hours before the US and Israel attacked Iran. New York Times investigation.

“The rapid growth and proliferation of this platform, its cryptocurrency infrastructure, and the anonymity it provides users may have created undesirable structural conditions that bad actors, particularly those with national security clearances, could exploit,” Comer wrote to Coplan.

Kalshi, meanwhile, says event conventions related to war or death are not allowed. However, many political candidates were seen betting on their own race on the platform. In April, Kalshi removed three congress candidates who were betting on their candidacy. Comer talked about these bets and the company’s expansion into more than 140 countries in his letter to Kalshi.

“The rapid global expansion of the Kalshi platform raises questions about whether internationally held event contracts are subject to equivalent authentication and insider trading prohibitions as domestic event contracts,” Comer said. he wrote.

Bipartisan members of Congress have introduced a series of bills this Congress to rein in prediction markets. While some deal specifically with the issue of insider trading, others are broader and seek to root out other activities on the platform, including sports betting.

Comer’s research is as follows: Letter from seven Democratic MPsHe called on the chairman of the Oversight Committee, led by Rep. Chris Pappas of New Hampshire, to subpoena the platforms.

“The American public has a legitimate interest in knowing whether individuals given classified national security information are using that access for personal financial gain,” Democratic lawmakers wrote on May 11. “A committee investigation conducted through subpoenas would involve internal records, which is the only way the individuals conducting these trades can be identified and the question of whether these platforms are living up to their responsibilities can be answered.”

In his letters, Comer requested documentation and communications from both CEOs about how each company verifies identities, enforces geo-restrictions and detects unusual transactions. Comer requested all information submitted by June 5.

Disclosure: CNBC and Kalshi have a business relationship that includes customer acquisition and minority investment.