"These contracts present dangerous national security risks, including creating incentives to incite violence, foment geopolitical conflicts, and disclose classified information. These recent events ... underscore the dangerous incentive structures that prediction markets can create when they allow wagering on catastrophic outcomes."
"Federal law already bars certain types of event contracts. Under the Commodity Exchange Act and CFTC rules, regulated exchanges cannot list contracts tied to terrorism, assassination, war or similar events. Still, the senators contend that gray areas and uneven enforcement have allowed troubling products to flourish, particularly on platforms operating outside the United States."
"Critics say those markets expose glaring weaknesses in oversight and create openings for insiders with sensitive information to profit. In another case, Israeli authorities charged a reservist and a civilian in an alleged scheme involving classified information and betting activity on Polymarket."
Senate Democrats, led by Senator Adam Schiff, sent a letter to CFTC Chairman Michael Selig requesting stricter regulation of prediction market contracts involving violence, war, and death. The lawmakers identified recent offshore exchange offerings on topics like NASA's Artemis II mission explosions, Venezuelan political upheaval, and Ukrainian territorial conflicts as examples of problematic markets. These contracts present national security risks by creating incentives for violence, geopolitical conflict, and classified information disclosure. While federal law already prohibits certain event contracts under the Commodity Exchange Act, senators argue enforcement gaps allow troubling products to proliferate on offshore platforms. They specifically urged explicit prohibition and active policing of contracts resolving on or correlated with individual deaths.
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