Two US senators are moving to restrict prediction market operators from offering contracts tied to sports and certain gambling-style activities.
The Wall Street Journal reported today (23 March) that Senators Adam Schiff and John Curtis are set to introduce legislation targeting firms overseen by the Commodity Futures Trading Commission (CFTC).
The bill would prevent these companies from offering listings on contracts based on sporting events, as well as restricting offerings that resemble casino-type products such as “slot machine games, video poker, blackjack and bingo.”
Legislators supporting the bill claim that federal regulators have opened the door to expansion in the realm of traditional state-level gambling laws.
Sen. Schiff said the system allows activity that circumvents state-level safeguards and does not produce any public revenue.
Sen. Curtis highlighted concerns over younger audiences who are being exposed to betting-like products that, in his opinion, are not within the appropriate range of regulatory control.
The legislation represents the first bipartisan attempt by Senators to target prediction markets, and stems from growing discontent among various stakeholders.
Tensions between federal and state regulators have intensified in recent months. The CFTC has maintained that it holds exclusive authority over event-based derivatives, including contracts linked to sports outcomes.
In February, the agency submitted arguments to a federal appeals court asserting that states lack jurisdiction over these platforms.
It subsequently released new prediction markets guidance that was presumably designed to reiterate its position as the sector’s sole regulator.
States continue to target prediction market operations
Several states have pursued their own enforcement measures. Nevada has obtained a temporary restraining order against Kalshi, which bars it from making contracts related to sports, elections, and entertainment in the state.
Arizona has also pursued criminal charges against companies associated with Kalshi, alleging the operation of an unlicensed gambling business.
The platform has contested those claims and urged state officials to withdraw the case.
Elsewhere, professional sports leagues have had varied responses to prediction markets.
While sports betting has been widely embraced in the US, there are concerns about the ability of prediction market operators to effectively monitor any manipulation or misuse of insider information.
However, despite the concerns, Major League Baseball has just entered into a licensing agreement with Polymarket.
The deal allows the company to use baseball data and branding, while establishing a partnership to monitor sports betting-related activities.
The National Hockey League (NHL) also holds partnerships with both Polymarket and Kalshi.
At the same time, federal lawmakers are advancing multiple proposals to tighten oversight of prediction markets as the policy divide over federal versus state control widens.
One of the most recent attempts is the Prediction Markets Security and Integrity Act, which was sponsored by Sens. Richard Blumenthal and Andy Kim, and was introduced on 11 March.
The bill aims to create federal regulations while bolstering state powers in gambling-related activities. It prohibits contracts based on events like war, death, and military action due to security concerns.
A central provision aims to prevent platforms from using federal derivatives classification to bypass state gambling laws and tax structures, marking a direct challenge to current interpretations of federal preemption.
Insider trading on prediction markets is cause for concern
Another proposal, the Banning Event Trading on Sensitive Operations and Federal Functions Act, known as the BETS OFF Act, was introduced on 17 March by Sen. Chris Murphy and Rep. Greg Casar.
This legislation targets potential misuse of insider information by prohibiting trading on non-financial government actions or events controlled by a single decision-maker.
The bill also includes provisions designed to restrict offshore platforms, including Polymarket, by limiting payment processing for unregulated event trading systems operating outside US jurisdiction.
Also earlier this month, the Event Contract Enforcement Act was introduced by Reps. Blake Moore and Salud Carbajal. The bipartisan measure focuses on closing perceived gaps in the Commodity Exchange Act.
It would mandate a ban on contracts involving categories labeled as terrorism, assassination, war, gaming, and illegal activity, while also extending restrictions to election-related outcomes.
The proposal also includes a provision that allows states to opt out of these restrictions. This way, states can allow sports-related contracts in their jurisdictions under specific conditions.
The discussion also draws on previous legislative attempts, such as the Ban Gambling on Elections Act introduced by Sen. Jeff Merkley and Rep. Jamie Raskin in December 2024.
That bill focuses exclusively on prohibiting wagers tied to US election outcomes.
Lawmakers supporting the measure argue that financial incentives linked to election results could undermine democratic processes by encouraging attempts to influence outcomes.