Two Democratic senators have directed a formal inquiry to the Department of Health and Human Services regarding the growing influence of prediction markets on clinical drug trials and regulatory approvals. In a letter dated Wednesday and obtained by CNBC, Senator Angela Alsobrooks of Maryland and Senator Ron Wyden of Oregon expressed significant concern over these financial instruments. They requested that HHS Secretary Robert F. Kennedy Jr. detail the specific measures the department has implemented to mitigate potential risks arising from these markets.
The senators argued that allowing individuals to wager on the success of medical trials undermines the scientific process. Their correspondence stated that such activities create perverse incentives for researchers and may harm trial participants. They warned that these dynamics could lead to dangerous medical outcomes for a large number of Americans who rely on new treatments.
The concerns raised by Alsobrooks and Wyden align with views held by some healthcare professionals. These experts fear that the existence of betting markets could alter how patients perceive the risks and benefits of participating in clinical trials. Additionally, the senators highlighted the risk of insider trading, noting that researchers and regulators might possess nonpublic information that could be used to gain an unfair advantage in these markets.
To address these issues, the senators requested a comprehensive review of internal communications. They asked HHS to provide all records regarding staff participation in prediction markets related to matters governed by the department. The request also included communications between HHS and prediction market platforms, as well as any correspondence with the Commodity Futures Trading Commission, which regulates such event contracts. The senators further requested internal analyses assessing the potential impact of these markets on public health.
In their letter, Alsobrooks and Wyden emphasized the need for essential guardrails. They stated that HHS, the FDA, and the National Institutes of Health must uphold the integrity of the drug development process. The goal, according to the senators, is to maintain public trust by preventing individuals from profiting off the success and approval of drugs that the American public depends on.
Both major prediction market platforms, Kalshi and Polymarket, currently offer these contracts. However, there is a distinction in how they are accessed. On Polymarket, these specific markets are available only on its international exchange, which is not regulated by U.S. authorities. Kalshi, on the other hand, launched its related markets in July with specific safeguards in place.
When Kalshi introduced its drug trial markets, the company stated that it implemented guardrails to limit trading risks. These measures include restricting markets to late-stage trials and ensuring that contracts are listed only after a trial has completed enrollment. Kalshi also committed to using employee verification technology for all traders participating in these specific markets.
Tarek Mansour, CEO of Kalshi, defended the platform's role in July. He described drug development as one of the most information-constrained industries on earth. Mansour argued that the data determining which drugs advance is often inaccessible to the public. He stated that surfacing this information is the core purpose of Kalshi and that the company is committed to executing this mission correctly.
Kalshi also noted that investors frequently buy shares in biotechnology and pharmaceutical companies awaiting regulatory approval in the traditional stock market. Jack Such, a spokesperson for Kalshi, told CNBC that the hypothetical concerns raised by the senators apply equally to the equities market. He pointed out that the size and incentive for bad activity are significantly higher in the equities market than on Kalshi. Polymarket and the Department of Health and Human Services did not immediately respond to requests for comment.
CNBC noted in a disclosure that it has a commercial relationship with Kalshi, which includes customer acquisition and a minority investment.
