Ald. Knudsen proposes banning city employees from using inside info to bet on prediction market apps

The possibilities are endless — from betting on the number of candidates entering the 2027 mayoral sweepstakes to whether Bally’s permanent casino will open on time, or generate enough of a jackpot to save police and fire pension funds.

With the prediction market betting craze just beginning to spread like wildfire, lakefront Ald. Timmy Knudsen (43rd) wants to get ahead of it, at least when it comes to policing present and former city employees and elected officials.

Knudsen is following the trail blazed by Gov. JB Pritzker and his counterparts in six other states by introducing an ordinance that would prohibit present and former city employees — and elected officials — from using insider information to bet on prediction markets.

Apps that include Kalshi and Polymarket are being used to place bets on everything from election winners and the number of candidates entering a specific race for office, to budgetary and foreign policy decisions by elected officials.

It would prohibit current or former city officials, appointees and employees from using “confidential information or any non-public information, including the identity of the subject of an investigation” to either participate in prediction markets or “assist any other person” in placing those bets.

“The prohibition… includes the use or disclosure of any confidential information or non-public information by a current or former city official or employee to participate in or assist any other person in participating in prediction markets or event-based contracts, regardless of whether the individual ultimately profits,” the proposed ordinance states.

Knudsen acknowledged Thursday that the proposed ordinance is merely a starting point.

As prediction markets evolve, the ordinance would need to be strengthened repeatedly. The cash-strapped city may also be required to create some sort of a policing function that does not now exist.

“It’s such new terrain that of course government’s not caught up on legislation related to it, because nobody is. It’s almost like the start of the internet. AI is similar,” Knudsen told the Sun-Times.

“I heard from friends in the last election cycle that people were tracking the odds of different candidates — almost like a sport. You can currently bet on anything on those platforms. They have not yet been regulated.”

Already, the ordinance as proposed includes what Knudsen called a “forever ban.”

“There are hypotheticals here where you could use information in 15 years that you got now as an alderperson related, maybe, to a zoning project or something that never happened, and you could use it on the betting market. Some weird niche bet related to Chicago development, and you could profit,” Knudsen said.

“We’re just trying to shut that down from the get-go. And I anticipate more restrictions going forward. We’re going to have to grow it as things change. It’s really the Wild Wild West.”

Without an internal policing function, Knudsen said he’s counting on prediction apps themselves to do their own policing. In fact, they’ve already done it.

“We have seen with the recent incident where Kalshi policed and exposed three government employees for making bets like this — that they are open to do so. They want to survive. They don’t want the government to take them down completely,” he said.

David Greising, president and CEO of the Better Government Association, said the city and state need to "step in and regulate" betting on prediction markets at a time when the U.S. Justice Department is either "pulling back resources or redirecting" resources away from the fight against public corruption.

"I would cast it as a good first step, but not yet enough. We need more clarity about who would enforce laws like this, how they would be enforced and we need to build the investigative expertise in order to do so," Greising said. "If you're going to make laws like this, building the means of enforcement is just as important as putting a marker down and saying this type of activity is illegal."

Last week, Pritzker signed an executive order barring state employees from using insider information to bet on prediction market apps,
citing highly accurate bets made in February regarding U.S. and Israeli strikes on Iran, an anonymous trader who earned more than $400,000 after placing large bets on the removal of Venezuelan President Nicolás Maduro, and a user who placed a $40,000 bet that OpenAI would launch an AI web browser before the end of the month. Another example cited was a trader who placed a surge of bets on Taylor Swift’s engagement shortly before it was publicly announced, and earned significant returns.

Former Chicago Mayor Rahm Emanuel who, like Pritzker, is mulling a 2028 presidential bid, voiced support for a 10% federal tax on online sports betting and prediction markets to boost revenue for science and technology. Emanuel has also said he supports a ban for federal employees.