Prediction Markets Hit by Insider Trading Bills, Account Freezes, and a First-of-Its-Kind Tax

The bill does not ban prediction markets. Instead it creates a specific insider-trading prohibition tied to political events and policy decisions. Budzinski sent a letter to Speaker Mike Johnson on April 30, 2026, urging a House floor vote, but as of May 19, 2026, the House had not yet acted on any prediction market ban .

Public Integrity in Financial Prediction Markets Act of 2026 (Senate)

A day after the PREDICT Act dropped, a bipartisan group of senators introduced the Public Integrity in Financial Prediction Markets Act of 2026. Sponsored by Senators John Curtis (R-UT), Elissa Slotkin (D-MI), Todd Young (R-IN), and Adam Schiff (D-CA), the bill extends insider-trading prohibitions to all federally elected officials and government employees and also imposes a disclosure requirement on prediction market bets .

The covered individuals include the President, Vice President, members of Congress, congressional staff, and political appointees . The bill defines penalties for misconduct, including fines of up to double the profits made from prohibited trades .

The STOP Corrupt Bets Act

The most aggressive legislative proposal is the Stop Trading On Predictions and Corrupt Bets Act of 2026 (STOP Corrupt Bets Act), introduced on March 26, 2026 by Senator Jeff Merkley (D-OR) and Representative Jamie Raskin (D-MD). Bill numbers are S. 4226 in the Senate and H.R. 8123 in the House .

The act would amend the Commodity Exchange Act to prohibit certain event contracts outright—specifically those tied to political elections, sports, government actions, and military operations . Co-sponsors include Senators Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), Chris Van Hollen (D-MD), and Sheldon Whitehouse (D-RI) . This marks a significant escalation beyond insider-trading guardrails and toward a structural ban on major categories of prediction market contracts.

Japan: Bitbank Freezes Accounts Linked to Polymarket

On June 15, 2026, Bitbank, one of Japan’s largest registered cryptocurrency exchanges, issued an official notice warning users that transacting with prediction market platforms—specifically naming Polymarket—would result in immediate account suspension .

The freeze is comprehensive: affected accounts lose access to login, crypto deposits and withdrawals, Japanese yen withdrawals, and all trading functions . The exchange made clear that it bears no liability for losses resulting from these suspensions .

Bitbank grounded its action in Japan’s long-standing gambling prohibition. Article 185 of the Japanese Penal Code classifies wagering on uncertain real-world outcomes for financial gain as illegal gambling, with fines up to ¥500,000 . The exchange stressed that this applies even when the prediction market services are operated by foreign entities .

Japan's National Police Agency has previously stated that residents who access and participate in overseas online gambling—even when the platform operates legally abroad—are still committing a criminal act . Prediction markets have not been authorized under Japan's Financial Instruments and Exchange Act, and the Financial Services Agency has issued no specific guidance creating a legal pathway for them .

Polymarket already blocks Japan-based users and, as of May 2026, was reportedly seeking market approval in the country—a process that now looks significantly more complicated .

Kentucky: The 14.25% Excise Tax and the Coalition Lawsuit

In April 2026, the Kentucky General Assembly enacted a 14.25% excise tax on transaction fees charged by prediction market operators—the first tax of its kind in the United States .

On June 12, 2026, a group calling itself the Coalition for Fair Markets—comprising Kalshi, Crypto.com, and Polymarket—filed a lawsuit in Kentucky state court challenging the tax . The complaint argues the levy is discriminatory, unconstitutional, and preempted by federal law . It specifically contends that the tax rate is higher than that applied to Kentucky's "favored incumbent industry" .

The case remains pending and will test a novel question: whether states can single out prediction market operators for targeted excise taxes that may conflict with federal commodities regulation.

The Bigger Picture

The three fronts share a common thread: prediction markets are no longer being ignored as a regulatory gray zone. In Washington, the range of bills—from targeted insider-trading rules to near-total prohibitions—shows that lawmakers are still negotiating where the line should be drawn. In Japan, the line is already drawn, and enforcement has begun. In Kentucky, the fight is over money and jurisdiction, not just legality.

For the platforms themselves, the challenge is now existential. They must navigate multiple, potentially conflicting regulatory regimes simultaneously—each of which could reshape where, how, and whether prediction markets can operate at all.