Regulation is coming, so why does Kalshi support legislation to ban insider trading?

The “black swan” event in the prediction market has finally triggered a regulatory backlash in the United States. When a mysterious account on Polymarket made a $32,500 investment and earned $400,000 within 24 hours, this perfect “insider betting” not only exposed vulnerabilities in the market but also directly prompted new legislative actions. Interestingly, Kalshi, a leading industry player, did not oppose but instead actively supported this regulatory storm. What is the underlying logic behind this?

From a “Perfect Bet” to Insider Trading Chaos

The trigger for the incident is quite clear. In late December 2025, a newly created Polymarket account made multiple trades, all betting that the US would take action against Venezuela. The account heavily bought contracts stating “Maduro will be ousted before January 31” at about $0.07 each. When the US announced the arrest of Maduro, this trade yielded over 1200%, with the account profiting more than $400,000.

Even more outrageous, market data showed that the relevant contract prices started rising abnormally hours before Trump officially announced. This is no coincidence—it’s blatant insider trading.

There are similar cases from the same period. A user named “AlphaRaccoon” accurately bet on the nearly overlooked winner before Google released its annual trending searches list, making over a million dollars in a single day. These events, combined, directly triggered the nerves of US regulators.

Legislation Approaching, Targeting Government Officials’ “Privileges”

New York Democratic Congressman Ritchie Torres quickly pushed forward the “2026 Public Integrity Financial Prediction Market Act.” The core of this bill is straightforward: it bans federal elected officials, political appointees, and administrative employees from participating in prediction market transactions involving government policies, actions, or political outcomes.

In other words, insiders with nonpublic information cannot trade on prediction markets. It sounds obvious, but in this emerging field, regulation has long been in a vacuum.

According to the latest news, the bill will be formally introduced this week. The timing is critical—it directly responds to public opinion sparked by the Polymarket insider event.

Regulated vs. Unregulated, Kalshi’s “Timely Statement”

Kalshi CEO Tarek Mansour stated on January 8 that he supports this legislation and emphasized that Kalshi has long implemented anti-insider trading measures in its platform rules. He further pointed out that Kalshi adopts insider trading rules similar to those of the NYSE and NASDAQ, prohibiting users with nonpublic information from participating in relevant market trades.

The key point of this statement: Kalshi is proactively drawing a clear line.

Mansour also emphasized that current controversies mainly focus on platforms outside the US and unregulated ones. The implication is clear: the problem isn’t Kalshi, but offshore platforms.

Why Does Kalshi Support This Legislation?

This is worth pondering. On the surface, new restrictive laws should be negative for all platforms. But behind Kalshi’s proactive support are several logical considerations:

Differentiation Competitive Advantage

As a regulated platform, Kalshi has a compliance foundation. Supporting legislation helps establish a “legitimate” image, setting itself apart from platforms like Polymarket that grow wildly without regulation. This is very advantageous for attracting institutional investors and risk-averse users.

The Inevitable Long-term Market Standardization

Prediction markets experienced explosive growth in 2025. According to relevant data, in September alone, the combined trading volume of Kalshi and Polymarket reached $1.44 billion. Such rapid growth will inevitably lead to tighter regulation. Kalshi’s early embrace of regulation is essentially preparing for the industry’s long-term standardization.

Suppressing Competitors

Although it may seem less “glamorous,” the implementation of this new law will put greater pressure on platforms lacking compliance infrastructure. This benefits Kalshi’s competitive landscape.

Industry Outlook: New Growth After Standardization

Regulation does not mean market decline. Bernstein analyst Gautam Chhugani predicts that prediction market trading volume could double to $70 billion in 2026, with annual revenue around $1.4 billion. This growth rate suggests that standardization might actually unleash more demand.

Why? Because once regulatory frameworks are clear, institutional investors and corporate users will feel more confident entering this market. Platforms like Kalshi, Robinhood, Coinbase—those that are regulated or have compliance commitments—are expected to gain more regulatory support and market share.

Summary

This story of “from insider betting to regulatory legislation” essentially reflects the transition of prediction markets from wild growth to maturity. Kalshi’s active support is not compromise but an accurate grasp of industry trends.

Key points:

• Insider trading incidents exposed market loopholes; legislation is an inevitable choice
• The divide between regulated and unregulated platforms will intensify
• Standardization will not kill the industry; it may instead unlock greater growth potential
• The competitive landscape of prediction markets in 2026 will be reshuffled, with compliance becoming a core competitive advantage

For investors, this is also a signal: prioritize platforms and tokens with clear compliance commitments related to prediction markets, rather than projects that claim “decentralization” but lack rules.