Legislating the Morality of Prediction Markets
Beer, Football and Gambling
On January 9, 2026, Congressman Ritchie Flores, a Democrat from New York’s 15th District, introduced a bill titled Public Integrity in Financial Prediction Markets Act of 2026. To be clear, a congressman attached his name to legislation that begins “Public Integrity.” It gets better. He is a Democrat. Hold on, he is from New York.
Regardless of the laughable contradictions, the subject of this brief essay is the rapid growth of prediction markets, the controversy they have stirred, and the demands for regulatory action to curb real or imagined abuses. Bear in mind, predictions markets are as old as dirt, or at least markets for dirt. But high-speed internet and their creative entrepreneurial types are relentless in catering to the whims of people hungry for cheap meaning in their lives.
Bookmakers have been taking bets on almost anything for which there is demand, numbers rackets became state lotteries, the Las Vegas line on American football point spreads is what I recall most from growing up, and betting shops in London have been around since the 18th century. In fact, Lloyds of London is featured in Chapter Five of The Moneyball Method as catalyst for global trade efficiencies.
But regarding HR 7004 mentioned in the first paragraph, Gambling Insider describes the current situation as follows:
Prediction markets exploded in 2025. What used to be a niche corner of finance is now front and center, driven by Kalshi’s landmark court wins, Polymarket’s high-profile U.S. comeback, and growing interest from major finance and betting apps. Today, prediction markets aren’t just for political quants; they’re becoming mainstream tools for pricing real-world events. Here’s how the top prediction markets in the U.S. stack up in terms of valuation and performance in 2025.
Besides Kalshi and Polymarket, the top five prediction market vendors are ForecastEx, FanDuel Predicts and PredictIt. And what I discovered in my amazingly short time dedicated to research on this subject, all of them are regulated or approved by the Commodity Futures Trading Commission (CFTC). And according to Daily Forex, the domain of the CFTC can be summarized as:
The CFTC’s vision is to be “the global standard for sound derivatives regulation,” with a mission to “promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.” It operates under the Commodity Exchange Act (CEA) statutory framework to protect market users and the public from fraud, manipulation, abusive practices, and systemic risk.
So far, so good. But since I don’t gamble except at the poker or euchre table when I know my opponents to be of the same or lesser skill and greater alcohol propensity, I checked with an arbitrarily chosen third party on Substack. The first one I saw seemed to have greater experience, but I don’t know about the alcohol thing:
But this was a Super Bowl halftime market. Bad Bunny, fireworks, people dressed up as plants, Ricky Martin and Lady Gaga, nowhere near equities trading. So, what happens when you inside trade in this instance? Nothing. Super Bowl entertainment markets aren’t regulated like securities, and everyone knows it. Morally debatable? You bet. But illegal? It seems not. And that’s the very reason why prediction markets might be in trouble. As these markets grow, the incentives warp. The bigger the liquidity, the bigger the temptation to influence outcomes.
To me, this attitude among a plurality of the voting public is what expands the government regulatory protection racket. Yet, what is morally debatable about this? That is impossible to know without a defined moral standard. And because it’s not illegal that’s the very reason why prediction markets might be in trouble? No.
Perhaps the best conclusion from this quote is that incentives warp as markets grow. Yes, the incentive for the looters in government to regulate and collect indulgences as campaign contributions and tribute as fees and fines - is also as old as dirt. In fact, the writer goes on to warn us about sports fixing, coercion and potential violence to manipulate outcomes. But that is what the IRS, CFPB, Treasury, and EPA already do.
If rights are being violated, that must be prosecuted. America doesn’t need another bureaucratic scheme that is always behind the curve on technological innovation and only protects the longevity and wealth of the agency. So, what does the Public Integrity in Financial Prediction Markets Act say?
It shall be unlawful for a covered individual to knowingly engage in a covered transaction if the covered individual (1) at the time of the covered transaction, possesses material nonpublic information relevant to such covered transaction; or (2) may reasonably obtain such material nonpublic information in the course of performing official duties, including when such information would not otherwise be available to a member of the public exercising reasonable diligence.
The “covered individuals” are elected officials of the Federal government, employees of the US House of Representatives or US Senate, political appointees, and employees of an Executive Agency. In other words, an Act of Congress is needed to protect prediction markets from the acts of congressional and executive branch personnel. And you might be next.
This is window dressing. It is a red herring. Every cosponsor of this bill is a Democrat. But bipartisanship is irrelevant. Principles matter. This bill is activity for the sake of activity by people who are enemies of money, the price mechanism, the elegance of markets, and earned profit. But the real problem is the anti-liberty mobs that demand more controls by the State.
For the objective investor, the principle is to become your own hero. If your identity is tied to the NFL team where you grew up, a European football team, some NASCAR or Formula One driver, a pop music icon, or just plain gambling for the sake of picking winners that validate nothing about your ability to create – then that is the moral debate. The choice for independence is yours. Or as George Orwell put in his classic novel titled 1984,
Physical work, the care of home and children, petty quarrels with neighbors, films, football, beer and above all, gambling filled up the horizon of their minds. To keep them in control was not difficult.