Rep. Don Davis, D-N.C., is seen outside the Democratic National Committee, Sept. 19, 2024.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
With less than a month until the midterm elections, prediction markets’ political contracts are in focus as observers look to see if they’ll accurately forecast who will win various races across the country. But one Democratic representative wants to restrict candidates from trading on those contracts.
Rep. Don Davis, D-N.C., introduced a bill on Monday that would ban candidates for federal office from trading on prediction market contracts related to their own elections, his office shared exclusively with CNBC.
Introduced during a pro forma session of the House of Representatives, the “No Betting on Your Own Race Act” seeks to formally put into law what prediction market platforms have already been enforcing on their own. The platforms have actively sought to curb individual candidates from trading on their own contracts due to concerns about insider trading.
Davis’ proposal would apply a fine of $10,000 or an amount equal to three times the net financial gain resulting from the trade — whichever figure is larger — to individuals who are caught placing trades on event contracts related to their own candidacy.
“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 in a statement. “To establish consistency and ensure all federal candidate campaign committees understand this, Congress must pass this common-sense legislation.”
A billboard for Kalshi showing 2024 presidential election odds across from the Nasdaq MarketSite in New York, Nov. 6, 2024.
Michael Nagle | Bloomberg | Getty Images
The decision by Davis to introduce the bill follows a controversy involving Laurie Buckhout, his Republican opponent in North Carolina’s 1st Congressional District, which is seen as a tight battleground race.
Buckhout settled with prediction market platform Kalshi in August after the company found that she traded on contracts related to her candidacy. She paid a penalty of just under $2,600 for her trades and was suspended from Kalshi for three years.
“I bet on myself. Literally,” Buckhout said in a statement at the time. “It was a dumb mistake, and as soon as I learned there was an issue, I worked to make it right.”
Davis in a post on X at the time said that his opponent’s decision to place the trades was “a disqualifying breach of public trust.”
The House and Senate are not set to meet until after the midterm elections, meaning the proposal has little to no chance of getting implemented for the current electoral cycle.
In April, the Senate approved a resolution to ban senators and staff from trading on prediction markets, a move which leading platforms Kalshi and Polymarket praised. That resolution, though, did not extend to candidates running for the U.S. Senate who are not an incumbent.
The House of Representatives has yet to pass a similar ban, though resolutions to do just that have been proposed.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.