Insider Trading Gets Rugged: Kalshi & Polymarket Ban the Deployers as Congress Tries to Fork the Whole DApp

Two of the biggest prediction-market protocols, Kalshi and Polymarket, deployed a major governance update on Monday, adding new slashing conditions to curb insider trading.

Kalshi's new code includes a pre-emptive blacklist for political candidates trying to front-run their own campaigns, plus anyone with a backstage pass to college or pro sports—athletes, coaches, and even the refs who could blow the whistle on a market.

Not to be outdone, Polymarket pushed its own upgrade, banning any user caught trading on pilfered alpha, illegal tips, or anyone who could directly manipulate a market's oracle. Consider it a "no insiders" pool rule.

These hard forks follow the on-chain drama where Polymarket degens seemingly extracted maximum value from well-timed positions ahead of U.S. and Israeli ops in Iran and a wild plan to extract Venezuela's Nicolás Maduro. Former Cointelegraph analyst Ben Yorke told The Guardian the Iran-strike bets looked like a classic "wallet salad" operation—someone with the private keys placing bets at market price across multiple accounts to avoid the chain analysis.

Kalshi's team claimed this ban "has been in the works for months," a classic move to get the code audited and deployed before the regulators drop a surprise mainnet upgrade of their own.

In a stunning display of cross-chain communication, Senators Adam Schiff (D) and John Curtis (R) that same day proposed the bipartisan "Prediction Markets Are Gambling Act." This bill aims to fork the CFTC's jurisdiction, preventing registered entities like Kalshi and Polymarket US from listing any event contracts that smell even faintly of a sportsbook or casino floor.

Schiff dismissed these contracts as "sports bets — just with a different ticker symbol," arguing they've been offering leverage in all 50 states while blatantly ignoring the local consensus rules. Curtis framed it as a jurisdictional clarity upgrade, saying the bill "ensures that state validators can maintain their authority over sports betting and casino gaming."

Kalshi CEO Tarek Mansour, a core contributor to the Coalition for Prediction Markets, fired back on 𝕏, calling the bill proof of "the casino lobby hard at work" and stating it's "not about protecting consumers; it's about protecting their monopoly liquidity."

The platforms, alongside big exchange Coinbase, are already in a multi-state legal bridge battle, with state AGs arguing their sports-event contracts are unlicensed gambling. The protocols' defense is a classic jurisdictional argument: these are financial derivatives, not mere bets, and fall under the exclusive purview of the CFTC's mainnet, not a bunch of competing state sidechains.