Chicago weighs insider-trading ban on Kalshi, Polymarket for city staff
Chicago is considering a ban that would bar city employees and elected officials from using non-public government information to trade on prediction markets including Kalshi and Polymarket. The proposed restriction targets insider trading on CFTC-regulated event-contract platforms by staff with access to information that could influence market outcomes. Both Kalshi and Polymarket are named in the proposal. The measure, reported July 7, adds a municipal ethics layer to the regulatory pressure the platforms already face.
For Kalshi and Polymarket, the Chicago proposal adds a new class of restriction they cannot preempt: municipal ethics rules that apply to traders rather than to the platforms themselves. City employees with budget, contract, or personnel insight become forbidden users regardless of federal licensing, carving non-compliance holes into every local market where similar ordinances spread.
The platforms gain no legal mechanism to screen for city employment status at signup, so enforcement falls on whistleblower complaints and post-trade audits rather than hard barriers. That uncertainty chills institutional flow from public-sector-adjacent desks already wary of headline risk. Each additional city that copies Chicago deepens the compliance architecture both platforms must maintain, raising the cost of staying in a market where state attorneys general already seek pre-merits bans in Michigan, Illinois, Minnesota, Kentucky, and New Mexico.
Chicago joins Michigan, Illinois, Minnesota, Kentucky, and New Mexico as jurisdictions now actively restricting Kalshi and Polymarket, turning the platforms' legal risk from isolated state fights into a coordinated multi-front siege that no single federal preemption ruling can end.