A group of Democratic lawmakers on Thursday sent a letter to the Commodity Futures Trading Commission urging the agency to bar insider trading and rein in event contracts on war, elections, government and military action and sports.

The CFTC published its plans to issue prediction markets regulation in March and is closing its public comment period Thursday.

Prediction markets like Kalshi and Polymarket have become increasingly popular in the last year, offering users the chance to wager on all manner of international community events, from sports, to politics, to entertainment.

A group of Democratic lawmakers is urging the Commodity Futures Trading Commission to issue a rule that would aim to rein-in prediction markets, curb insider trading and prohibit certain types of event contracts.

In a letter first shared with CNBC and sent to the CFTC on Thursday, a group of congressional Democrats led by Jeff Merkley of Oregon., called on the federal agency to address “the rapid erosion of integrity” within prediction markets such as Kalshi and Polymarket.

“We strongly encourage you to employ your authority to preserve the intent of prediction markets, and congressional intent behind the Commodity Exchange Act, by issuing a rule that prevents insider trading and corruption in the economy and prohibits event contracts on the outcome of elections, war and military actions in the U.S. or abroad, sports, and government actions without a valid economic hedging interest,” the lawmakers wrote.

Sens. Richard Blumenthal of Connecticut, Chris Van Hollen of Maryland, Sheldon Whitehouse of Rhode Island and Rep. Jamie Raskin of Maryland also signed the letter.

Prediction markets have surged in popularity in the last year, drawing increased attention from lawmakers, particularly after a series of bets were placed on the platform Polymarket ahead of major planet events.

Last week, a U.S. soldier was arrested for bets he allegdly placed on Polymarket ahead of military action in Venezuela that earned him $400,000. Kalshi, another prediction sector giant, suspended and fined three candidates for elected office for allegedly trading on their own campaigns.

A series of bills introduced since the start of the year aim to curb insider trading and in some cases bar event contracts on sports, elections, military and government actions. Merkley led a bill in March that would prohibit certain government officials from using prediction markets entirely. Another bill, introduced by Merkley in the Senate and Raskin in the House, would bar prediction sector bets on elections, war and sports.

In the letter, the group says event contracts tied to election outcomes “pose a danger to our democracy and elections.”

“These types of contracts did not exist before 2024 in the United States and for favorable reason,” they wrote. “Election-related prediction contracts create a financial incentive for political insiders involved in elections to subvert the will of American voters by altering their behavior.” This also touches on aspects of dividends.

Sports are the most popular type of event contract by volume, making up almost 90% of bets made on Kalshi in the year ending in February, according to the Congressional Research Service. While sports also made up the biggest single category on Polymarket, the category accounted for 38% of event contracts on that platform, the report found. The companies have also drawn the ire of state regulators and casinos, who argue sports event contracts are simply gambling.

“Event contracts on the outcome of a sports game or event are far from the intent of the CFTC’s mission. They are one of the most egregious examples of how these contracts represent gambling and violate states’ rights to regulate this activity,” the lawmakers wrote.

The CFTC issued a call for public comment in March as part of its rulemaking process.

“Today’s action is an crucial step in the Commission’s continued effort to promote responsible innovation in our derivatives markets,” CFTC Chair Michael Selig commented in a statement announcing the rulemaking period, which closed Thursday. “This begins the process of latest rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American humans that the CFTC will exercise its exclusive jurisdiction over prediction markets.”

The CFTC’s rulemaking comes as the agency has fought against states who have tried to regulate prediction markets, arguing that authority belongs to the federal government. Furthermore, experts in earnings report note the continued relevance.

The CFTC has filed lawsuits against several states that had issued cease and desist orders to prediction markets, saying they violated gambling laws. A federal appeals court in April ruled that Recent Jersey regulators could not bar the employ of Kalshi to place bets on sporting events.

“What we’re seeing is an attempt by the state gaming commissions to effectively nullify federal law,” Selig remarked in March on CNBC’s “Squawk Box,” before the Recent Jersey decision was released.

Disclosure: CNBC and Kalshi have a commercial relationship that includes a CNBC minority investment.