Prediction markets tied to clinical trials and drug approvals draw lawmakers’ ire

The inquiry, obtained first by CNBC, highlights mounting political and regulatory scrutiny surrounding the intersection of commercial prediction markets and public health oversight. Platforms such as Kalshi and Polymarket have expanded their financial offerings into the biopharmaceutical sector, allowing retail and institutional participants to wager on the outcomes of complex medical research and federal drug approvals. However, this trend has alarmed federal lawmakers and healthcare professionals alike, who argue that financial speculation on clinical outcomes introduces dangerous variables into an already sensitive scientific ecosystem.

"Allowing individuals to bet on the success of these trials and drugs undermines the scientific process, creates perverse incentives for researchers, harms trial participants, and could lead to dangerous medical outcomes for untold numbers of Americans," the senators wrote in their communication to the HHS leadership.

The concerns articulated by Alsobrooks and Wyden closely mirror warnings previously sounded by various healthcare professionals and ethicists. Critics of biotech prediction markets argue that the ability to wager on clinical trials could subtly or overtly alter patient perceptions and motivations when deciding whether to enroll in experimental studies. Furthermore, the prospect of substantial financial gain introduces acute insider trading risks. Regulatory officials, clinical investigators, and corporate researchers who possess privileged, nonpublic information about trial progress, adverse events, or pending FDA decisions could theoretically exploit that knowledge for personal enrichment within these lightly regulated prediction spaces.

Communication request

To better understand the scope of the issue and the federal government’s preparedness, the senators formally requested that the Department of Health and Human Services turn over all internal communications concerning staff participation in prediction markets tied to matters governed by the agency. Additionally, the lawmakers demanded copies of all correspondence between HHS officials and the prediction market platforms themselves, as well as interactions with the Commodity Futures Trading Commission, which holds regulatory jurisdiction over event contracts. They also asked for any internal risk analyses conducted by the department regarding the potential systemic impacts of these markets.

"HHS, FDA, and the National Institutes of Health must uphold the integrity of the drug development process and maintain public trust in the public health by putting essential guardrails in place to prevent individuals profiting on the success and approval of drugs that the American people depend on," Alsobrooks and Wyden emphasized in their letter.

The regulatory landscape governing these event contracts involves multiple federal bodies, notably the CFTC, which has increasingly scrutinized prediction markets over manipulation risks. Within the private sector, prominent prediction platforms have approached the integration of biotech contracts with varying operational models. Kalshi offers these specialized markets directly to U.S. participants, while Polymarket lists similar contracts exclusively on its international exchange, which operates outside direct U.S. regulatory oversight.

When Kalshi introduced its biotech prediction offerings in July, platform executives defended the initiative by highlighting built-in safety measures designed to minimize market manipulation and safeguard the integrity of underlying scientific data. The company stated that it limited its markets to late-stage clinical trials, explicitly restricting listings until a given trial had fully completed patient enrollment. Furthermore, Kalshi implemented employee verification technology to monitor and restrict trading activity among individuals who might have conflicts of interest.

"Drug development is one of the most important and most information-constrained industries on earth," Kalshi CEO Tarek Mansour said in July, defending the platform’s decision to launch the contracts. "The data that determines which drugs advance and which don’t is largely locked away from the people who need it most. Surfacing information is what Kalshi is for, and we are committed to doing it right."

Kalshi representatives also pushed back against the underlying premise of the senators’ critique, arguing that prediction markets are functionally no different from traditional equity markets, where investors routinely buy and sell shares in pharmaceutical and biotechnology companies anticipating regulatory announcements.

"The hypothetical concerns of the Senators apply equally to the equities market, which appears to be left out of their letter," Kalshi spokesperson Jack Such told CNBC. "The only difference is that the size — and incentive for bad activity — is significantly higher in the equities market than it is on Kalshi."

Representatives for Polymarket and the Department of Health and Human Services did not immediately respond to requests for comment regarding the senators’ inquiry.