A new bipartisan bill could redraw the line between federally regulated prediction markets and state-controlled sports betting, with real consequences for operators and players alike.
Congress Takes Aim at Sports Event Contracts
A bipartisan pair of U.S. senators is preparing legislation to stop prediction market platforms from offering contracts tied to sports and certain casino-style games.
Senators Adam Schiff of California and John Curtis of Utah plan to introduce the Prediction Markets Are Gambling Act, a measure that would amend the Commodity Exchange Act. The bill would block companies regulated by the Commodity Futures Trading Commission from listing contracts tied to sporting events or casino outcomes.
That would put platforms such as Kalshi and Polymarket squarely in the crosshairs.
Schiff argued that the current setup lets these companies sidestep state gambling rules while avoiding the taxes and consumer protections that licensed sportsbooks face. His view is simple: sports prediction contracts are sports bets, no matter what label gets slapped on them.
Why the Industry Has Lawmakers Nervous
Prediction markets have exploded in popularity across the U.S., pulling in billions in trading volume and drawing attention from investors. During Super Bowl week alone, sports-related activity surged, turning these platforms into direct rivals to giants like FanDuel and DraftKings.
For the average player, the appeal is obvious. These markets often look and feel a lot like betting, but they operate under a different framework. That difference is exactly what has lawmakers and regulators fighting over who gets to call the shots.
The proposed bill would ban CFTC-regulated firms from offering contracts on any sporting event or athletic competition. It would also cover gambling-style products tied to poker, blackjack, slots, and bingo.
Curtis framed the issue around state control and public harm, saying these products expose young people to gambling-style activity that should not be regulated through federal commodities law.
State Regulators Are Already in the Fight
The bill lands in the middle of a growing clash between federal oversight and state enforcement.
The CFTC has maintained that event-based derivatives fall under its authority, including contracts linked to sports. State officials are pushing the opposite argument, saying these products amount to unlicensed gambling when offered to local residents.
Nevada recently won a temporary restraining order blocking Kalshi from offering sports, election, and entertainment contracts in the state. Arizona has gone even further, filing criminal charges against companies tied to Kalshi over claims they operated without the proper license. Kalshi has rejected those claims and called on the state to back off.
Massachusetts and Michigan have also taken action, arguing that prediction markets are functioning as unregulated sportsbooks.
Operators Say a Ban Would Backfire
Companies in the space are warning that a crackdown on regulated platforms will not kill demand. Their argument is that users will simply move to offshore sites with fewer rules and less oversight.
Kalshi spokesperson Elisabeth Diana said banning sports contracts on regulated markets would push activity into unregulated corners of the internet. She also suggested the bill is being driven by casino and sportsbook interests that do not want new competition muscling into their lane.
That line will likely resonate with some players, especially those who already see prediction markets as a fresh alternative to traditional betting apps.
The Trouble Goes Beyond Sports
The debate is no longer just about football games and March matchups. Critics have also raised alarms about insider trading, misuse of nonpublic information, and even national security risks linked to event contracts.
One cited example involved an OpenAI employee who was dismissed after allegations tied to trading on inside knowledge of company news. Other cases involving geopolitical events have added fuel to concerns that some markets go far beyond harmless speculation.
Sports leagues are still feeling their way through the issue. Major League Baseball recently struck a deal with Polymarket for access to league data and branding, while still putting safeguards in place to watch for suspicious activity.
That mixed approach says plenty. Leagues see the money, but they also see the headache.
Bigger Rules Could Still Be Coming
This bill is part of a broader effort in Washington to rein in prediction markets. Other proposals introduced in recent weeks target contracts tied to elections, wars, and government actions.
Supporters say these markets can create bad incentives around serious real-world events. Critics of the restrictions say lawmakers are trying to crush a fast-growing sector before the rules are fully settled.
For now, the biggest unanswered question remains the same: are prediction markets a financial product, a gambling product, or a little of both?
The answer could decide who controls the market next, and whether players across the U.S. keep access to these platforms at all.
