Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah) plan to introduce legislation aimed at companies such as Kalshi and Polymarket, which are currently regulated by the Commodity Futures Trading Commission (CFTC). This marks the first bipartisan Senate effort specifically targeting prediction markets.
Senators Propose Bill Targeting Prediction Markets
The proposal would bar CFTC-regulated entities from offering event contracts, which are binary yes-or-no bets on future outcomes related to sporting events. It would also prohibit casino-style offerings such as slot machines, video poker, blackjack, and bingo.
While this marks the first bipartisan attempt by Senators to target prediction markets, it should be noted that it isn’t the only effort by congressmen to take action against such companies. Just last week, Senator Chris Murphy and Congressman Greg Casar proposed a bill to curb insider trading. However, the new proposal still remains the first bipartisan effort to change how prediction markets are regulated.
Supporters of the bill say that these markets serve as a “backdoor” to gambling. Senator Schiff criticized the CFTC for “greenlighting” these markets, while Senator John Curtis voiced concerns about exposing young people to addictive betting in states such as Utah, where most forms of gambling are prohibited.
The legislation seeks to establish federal rules while strengthening state authority over gambling activities. It bans contracts tied to events such as war, death, and military actions, citing security concerns. A key provision is designed to stop platforms from leveraging federal derivatives classifications to evade state gambling laws and tax regimes, directly challenging existing interpretations of federal preemption.
Why Are Senators Proposing This Legislation?
Platforms such as Kalshi and Polymarket let users trade contracts tied to a wide range of events, including politics, weather, pop culture, and sports. A significant share of activity centers on sports, putting them in direct competition with traditional sportsbooks like FanDuel and DraftKings.
This rivalry has fueled debate because traditional sports betting is regulated and taxed at the state level following the 2018 Supreme Court decision in Murphy v. NCAA. Additionally, this circumvents state consumer protections, undermining tribal sovereignty, and produces no public revenue, unlike more traditional forms of gambling.
In contrast, prediction markets argue they offer financial derivatives, which enable them to operate nationwide, even in states that restrict sports betting, such as Utah and, in certain cases, California. Under its current leadership, the CFTC has adopted a more permissive approach to event contracts, fostering their growth but attracting criticism from lawmakers.
Meanwhile, states including Utah, California, New York, and Nevada are pursuing legal action against these platforms, with courts divided over how to classify them. In fact, Nevada halted Kalshi’s operations in the state as a court ordered the company to suspend its activities in the state for at least two weeks.
Ultimately, this bill underscores bipartisan concern that prediction markets are effectively operating as unregulated sports betting and casino gaming at the federal level, bypassing state regulations.