HARRISBURG — Who will win Pennsylvania’s race for governor? How many data centers will be proposed here? Which state laws will be enacted this year?
That’s just a sample of the political questions that prediction market platforms, like Kalshi and Polymarket, allow people to bet on.
These platforms, which allow people to wager on the outcomes of a wide range of real-world events, are exploding in popularity. As the midterms approach and these markets receive more scrutiny, some ethics experts are raising concerns that they are ripe for abuse from government insiders or bad faith actors looking to sway elections.
The markets have also sparked a legal brawl between 20 states and the federal government over who has the authority to regulate and tax them. States could be losing out on more than $2 billion in annual tax revenue from winnings overall, according to the Tax Foundation, a nonpartisan think tank.
Democratic governors in at least seven states have expanded their ethics regulations via executive orders to specifically ban state employees from using insider information on prediction markets. Many pitched the orders as additions to existing ethics law that will provide an extra layer of protection against public corruption.
Pennsylvania isn’t one of those states; it has no specific ban on insider prediction market betting for public employees. Likewise, Gov. Josh Shapiro’s office and both chambers of the General Assembly lack their own policies on the issue.
They all referred to the state’s existing ethics law when asked what policies exist to prevent lawmakers and their staff from using their knowledge in prediction markets. The law restricts elected officials and public employees from using any information they obtain from their positions for their own financial gain.
Mary Fox, executive director of the State Ethics Commission, said Pennsylvania’s ethics law would apply to any public officials who use prediction markets — though it hasn’t been put to the test yet in a ruling or advisory opinion.
“If we were to receive a complaint that alleges a public official or public employee violated the Ethics Act, including through participation in a prediction market, we would review and investigate the complaint through our usual processes,” Fox said.
The State Ethics Commission lacks criminal jurisdiction, though it does hold subpoena power and can fine violators.
Election workers in Pennsylvania are already barred from betting on election outcomes as part of their oaths of office. Still, earlier this year, Delaware County’s board of elections banned its poll workers from betting on elections using prediction markets — anticipating that platforms might argue in court that they aren’t gambling operations. The companies have mounted that defense in ongoing litigation in a number of states.
At the federal level, there have already been several instances of public employees using knowledge they obtained in their positions to win hundreds of thousands of dollars. One of those instances included a series of large-scale bets on whether the U.S. would invade Venezuela and oust its sitting president.
What worries state Sen. Lindsey Williams (D., Allegheny) about all of this is the potential impact on public trust, which she noted is “at an all-time low.” She introduced a so-far stalled resolution earlier this year urging Congress to ban insider trading on stocks and precision markets for federal public employees, and she told Spotlight PA she is considering a similar proposal for the state.
“It's just a whole new area that we haven't dealt with before,” Williams said. “The vast majority of people working for the state and working in public service are doing the right thing, and I'm sure are above board and would not be betting on these things. But also, we have to make sure that we protect against, you know, the ones who do.”
‘Why wouldn’t they?’
There’s no evidence that any public employees in Pennsylvania have misused their knowledge to make bets. But the opportunities are plentiful, and it would likely be difficult — or impossible — to track down bad actors.
Because of his status as a possible 2028 presidential candidate, Shapiro is among many other prominent national politicians who appear on what users call “mention markets,” where users can bet on what a politician will or won’t say.
For instance, a question posed in January to Kalshi users was: “What will Josh Shapiro say during his Fox News Interview?"
In theory, someone who worked on Shapiro’s team could have placed money on certain topics they had known Shapiro would discuss before the interview aired. The question was opened just a few hours before and garnered more than $300,000 in total trade volume (that amount does not represent what was wagered; it includes every type of transaction between buying, selling, and trading).
Another Kalshi line in February asked what Shapiro would say during his State of the State Address. It had more than $185,000 in total trade volume on various policy proposals. Dozens of people annually have early access to the contents of that speech, from the governor’s office and other departments, to the state legislature and the Capitol press corps.
The public never knows who benefits from specific betting lines. Kalshi does not disclose usernames of its bettors, though it says on its website that insider trading is banned.
Researchers at the Anti-Corruption Data Collective in Washington, D.C. track the amount of money placed on specific elections and policy outcomes across various platforms.
They found that more than $16,000 has already been bet this year on whether Shapiro, a Democrat, will win a second term as governor against Republican challenger Stacy Garrity, who serves as state treasurer. (Kalshi and Polymarket give Shapiro, or a Democrat generally, greater than 95% odds of winning.)
Users can also find bet lines on local state legislative races.
Michael Hornsby, co-director of the Anti-Corruption Data Collective, told Spotlight PA there are nearly 16 times as many markets for the 2026 midterms nationwide as there were in 2024. And prediction markets are increasingly influencing the way voters follow politics, he said, with major media outlets often including prediction market odds in their data analyses.
That concerns Hornsby, who said the odds may not represent what the average voter thinks. Based on his organization's analysis of bets on Polymarket, which displays the profile names of its users, an outcome’s prospects may be swayed by a small number of professional or high-volume traders — especially in less popular races.
Hornsby said that disproportionality could allow individuals to sway public perception of a candidates’ odds of winning an election.
“What if not every bettor on election markets is motivated by short-term profit?” Hornsby said. “If someone thinks they can improve a candidate’s image and therefore their chances by pushing up their price on a prediction market, why wouldn’t they?”
The more “niche and granular” the market, the more a public official or campaign staffer could leverage insider information, Hornsby said. Knowledge like whether a candidate may drop out, receive a specific endorsement, or say something in a speech could allow an insider to place a successful bet or influence the ultimate outcome.
He also worries federal regulators overly rely on prediction market companies to report suspicious activity on their platforms, and said “states could and should ban all state government employees and political campaign staff from using prediction markets.”
A battle between state and federal oversight
Prediction market bets on politics aren’t brand new in Pennsylvania. The Anti-Corruption Data Collective found that more than $18,000 was spent last year on judicial elections across the Supreme, Superior, and Commonwealth courts.
But the issue is getting much more attention this year.
Though there remains no state executive order in place on prediction markets and the governor’s office and state legislature haven’t made specific policies, the state Treasury has. Garrity issued a notice in July that “strengthened and reiterated” existing policy, according to a spokesperson.
“Violations of this ethics policy may result in dismissal, termination, or other disciplinary actions as determined by the State Treasurer and the Human Resources Department,” the policy reads.
The governor’s office has a more general internal policy banning staff from engaging “directly or indirectly in any business transactions or private arrangement for profit which accrues from or is based upon his or her official position or authority.”
Shapiro’s campaign meanwhile does have a rule on prediction markets, said spokesperson Sam Reposa. Campaign staff are banned from betting on any elections on prediction markets or advising anyone else on their bets.
(Garrity’s gubernatorial campaign has not adopted a formal policy, according to spokesperson Matt Beynon, but “any such activity would be considered a violation of the trust placed in them.”)
If Pennsylvania lawmakers passed legislation regulating prediction markets, the commonwealth would likely end up embroiled in the same legal battle as other states.
President Donald Trump’s administration has maintained that the federal Commodity Futures Trading Commission has sole authority to regulate prediction markets. The CFTC does not classify prediction markets as gambling, instead saying the platforms trade in event contracts that "help the public forecast, plan for, hedge, and even harness perceptions of future events.”
That position, and the Trump administration’s cozy relationship with these platforms, has been criticized by state leaders who want to see further regulation.
Litigation over whether prediction markets fit the legal definition of gambling, and whether states can pass laws regulating them, is ongoing in district courts across the country. Most of the conversation has surrounded sports betting, though users can wager on anything from weather patterns to politics to celebrity culture.
A federal appeals court sided with states last week, but the issue is expected to reach the U.S. Supreme Court.
Pennsylvania’s Republican attorney general Dave Sunday, signed a July letter from a bipartisan coalition of 44 attorneys general calling prediction markets “a new form of casino used primarily for a few to manipulate others — the type of harms squarely within States’ historic police powers to regulate gambling.”
In March, Sunday attended a conference of Republican attorneys general at a Ritz-Carlton hotel in New Orleans where Donald Trump Jr. reportedly urged the officials to step back from attempts to regulate prediction markets.
The meeting didn’t sway Sunday’s position that states have the authority to regulate prediction markets as betting platforms, according to a spokesperson.
“Gambling that is not regulated as gambling creates consumer protection and addiction concerns,” Brett Hambright, Sunday’s spokesperson, said. “When there are not proper protections and disclosures, consumers are harmed, kids are exposed, and those addicted to gambling could be exploited.”
Kevin O’Toole, executive director of the Pennsylvania Gaming Control Board, has published two letters urging the CFTC to allow state governments to regulate prediction markets, as they do with sports gambling.
Any revenue from a traditional sports bet is taxed at 36% in Pennsylvania. According to O’Toole, the CFTC has created “yet another regulatory loophole” through its definition that leaves the state without any means to enforce that tax on prediction markets.
“It is entirely contrary to the public interest for a federal regulator to engineer abstract definitions that actively hollow out a state's tax base and allow commercial platforms to siphon billions of dollars away from local communities without contributing a dime to their welfare,” O’Toole wrote.
Due to the possibility of Pennsylvania launching or joining a lawsuit against the companies, a spokesperson for the board declined further comment.
Prediction market companies argue they are more akin to a financial market than betting platform because their listings are “Yes” or “No” contracts linked to the probability of certain outcomes that pit buyers directly against other buyers. Users are not betting against an oddsmaker or the house.
At least one key Pennsylvania lawmaker says he prefers to wait for the federal government to enact stricter regulations on prediction markets nationwide, despite its unwillingness so far to treat the platforms as gambling. State Senate Majority Leader Joe Pittman (R., Indiana) told Spotlight PA in a statement the federal government needs to adopt “swift guidance” to “ensure a uniform approach.”
“Clear boundaries are certainly warranted, and we would be well served to not allow the issue to spiral as we have seen with other gaming issues in the past and currently still before us,” Pittman said.
State House Majority Leader Matt Bradford (D., Montgomery) did not respond to questions about potential legislation to rein in prediction markets. In June, he told Spotlight PA in an interview that lawmakers and policymakers should be banned from using prediction markets on issues over which they hold sway.
Though their bills haven’t advanced out of committee, some state House Democrats are thinking of ways to rein in the industry.
State Rep. Danilo Burgos (D., Philadelphia) introduced legislation to give the Pennsylvania Gaming Control Board oversight of prediction markets, implement a 34% state tax and 2% local share assessment, adopt further consumer protections, and give the state attorney general authority to prosecute violators.
And State Rep. Tarik Khan (D., Philadelphia) is pushing bipartisan legislation to ban insider trading and market manipulation, limit betting on deaths and youth sporting events, and require platforms to report suspicious activity. His bill would also allow the state attorney general to prosecute violators.
Revenue from a potential tax could help offset Pennsylvania’s structural deficit. The nonpartisan Tax Foundation estimates that roughly $2.3 billion in annual tax revenue is on the table nationwide, if states that currently tax sports betting adopt identical rates for prediction markets.
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