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Congressman Ritchie Torres Faces SEC Ban Over Polymarket Trading

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  //politics-government.news-articles.net/content/ .. orres-faces-sec-ban-over-polymarket-trading.html
  Published in Politics and Government on Monday, January 5th 2026 at 18:50 GMT by Business Insider

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Congressman Ritchie Torres Faces Insider Trading Ban Over Controversial Polymarket Bets – A Look at the Case & Its Implications

U.S. Representative Ritchie Torres (D-NY) is embroiled in a significant controversy surrounding his trading activity on Polymarket, a decentralized prediction market platform. Following an investigation by the Securities and Exchange Commission (SEC), Torres has agreed to a settlement that includes a ban from trading on Polymarket for the next two years, along with a substantial civil penalty. The case raises complex questions about the legality of trading in prediction markets, particularly when those markets relate to geopolitical events and potentially involve information obtained through official channels.

What is Polymarket and Why Does it Matter?

Polymarket operates on blockchain technology, allowing users to bet on the outcome of future events – anything from election results to commodity prices. These "event contracts" have a “yes” or “no” resolution based on whether an event occurs. The platform utilizes Ether (ETH) as its base currency and offers fractional ownership in these contracts, making them accessible even with relatively small amounts of capital. While ostensibly offering a novel way to gauge public sentiment and forecast future events, Polymarket’s focus on politically sensitive topics has drawn scrutiny. As the Business Insider article highlights, Torres' bets focused heavily on Venezuela-related outcomes, specifically concerning the likelihood of Venezuelan President Nicolás Maduro leaving office before a specific date.

The Allegations: Trading on Inside Information?

The SEC’s investigation centered around Torres’ substantial trading activity on Polymarket between late 2021 and early 2023. He made significant bets, totaling over $80,000, that Maduro would leave office by February 2023. The crux of the accusation isn't that he engaged in traditional insider trading involving publicly traded company stock, but rather that he used non-public information gained through his official capacity as a member of Congress to inform his predictions on Polymarket.

Torres sits on the House Foreign Affairs Committee and has been actively involved in discussions regarding Venezuela and U.S. policy towards Maduro’s regime. The SEC alleges that his trading patterns strongly correlated with briefings he received, suggesting he leveraged privileged information not available to the general public. Specifically, the complaint notes a period of increased betting activity following a classified briefing on Venezuelan political dynamics. While Torres maintains he did not intentionally use non-public information and believed his trades were based on publicly available data, the timing and size of his bets raised red flags for regulators.

The Settlement & Its Terms

To avoid a formal lawsuit and potential criminal charges, Torres agreed to settle with the SEC. The settlement includes several key conditions:

• Two-Year Trading Ban: Torres is prohibited from trading on Polymarket for two years. This effectively restricts his participation in this specific prediction market platform.
• $50,000 Civil Penalty: He must pay a $50,000 civil penalty to the SEC.
• Acknowledgement of Wrongdoing (Without Admission): Torres agreed to acknowledge that his trading activity violated SEC rules without explicitly admitting guilt. This is a common practice in settlements to avoid protracted legal battles.

The settlement underscores the SEC's increasing attention on decentralized finance (DeFi) platforms and their potential for securities law violations, even when traditional stock isn’t involved. It also highlights the challenges of applying existing regulations to novel financial instruments like prediction markets.

Broader Implications & Legal Gray Areas

This case has significant implications beyond Torres' personal situation. It opens a Pandora's Box regarding the legality of trading on prediction markets, especially those tied to politically sensitive events. The SEC’s action suggests that even information gleaned from public sources but informed by official briefings could be considered non-public and subject to restrictions.

The legal framework surrounding prediction markets remains murky. While Polymarket argues its platform facilitates predictions rather than securities transactions, the SEC's view is clearly different. The case also raises questions about what constitutes "inside information" in the context of political forecasting. Can a member of Congress leverage their position and access to briefings to gain an advantage in predicting geopolitical events?

Furthermore, the timing of the settlement, just before Torres was scheduled to testify before the House Ethics Committee, has fueled speculation that it was intended to minimize further scrutiny and potential damage to his reputation. The article notes that Torres' initial response to the allegations involved a robust defense, claiming he acted lawfully and based on publicly available information. The subsequent settlement suggests a shift in strategy.

Looking Ahead:

The Ritchie Torres case serves as a cautionary tale for politicians and regulators alike. It demonstrates the SEC’s willingness to investigate activities within the burgeoning DeFi space and enforce securities laws even in unconventional contexts. The outcome will likely shape future enforcement actions against prediction markets and influence how government officials navigate the increasingly blurred lines between public service and personal financial gain, particularly when dealing with platforms that offer opportunities for speculative trading on global events. The case is expected to generate significant debate about the appropriate regulations for prediction markets and the responsibilities of elected officials regarding their own financial activities.

I hope this article provides a comprehensive summary of the Business Insider piece and its implications.