US senators introduce bill to restrict prediction market betting

On Monday, US Representative Adam Schiff and US Senator John Curtis introduced a bill that could prevent prediction market platforms Kalshi and Polymarket from allowing sports or casino-style betting. The proposed legislation would not apply to state-regulated sportsbooks like FanDuel and DraftKings, which are excluded from the bill. Schiff argued that sports prediction contracts are simply sports bets under a different name, claiming they are currently offered in all fifty states in violation of state and federal law. Curtis expressed concern that young people in Utah are being exposed to addictive sports betting and casino-style gaming contracts that belong under state control rather than federal regulation.

This legislative push follows an expansion of sports wagering in the US. Following a 2018 Supreme Court decision on sports betting, total sports wagers grew from $4.9 billion in 2017 to $121.1 billion in 2023. Prediction markets have captured a portion of this activity; Kalshi’s Super Bowl trading volume reached over $1 billion, representing a 2700% increase year-over-year. Proponents of the bill point to addiction concerns, citing research from the University of California San Diego’s Qualcomm Institute and School of Medicine showing that searches for help with gambling addiction increased by 61% after online sportsbooks became available.

Kalshi has opposed the proposed legislation. Elisabeth Diana, a spokesperson for Kalshi, argued that the bill is motivated by casino interests threatened by competition. Diana stated, “It’s clear this bill is motivated by casino interests that are threatened by competition. They’re more worried about protecting their monopolies than protecting consumers.” She also warned that the restrictions would push users toward offshore prediction markets. Polymarket did not respond to a request for comment.

The bill arrives as prediction markets, which are regulated by the Commodity Futures Trading Commission (the US federal regulator for derivatives and prediction markets), face a complex legal landscape. Currently, star athletes face possible prison time for their alleged roles in money laundering conspiracies. For Kalshi specifically, the app is temporarily banned in Nevada and is facing criminal charges in Arizona. In response to regulatory pressure, both Kalshi and Polymarket are adding new screening features to limit insider trading and manipulation. Kalshi is partnering with IC360 to block known athletes, officials, and employees from trading, following an incident involving an editor for YouTube star MrBeast. Meanwhile, Polymarket updated its rules to clarify that users cannot bet using stolen confidential information, act on illegal tips, or wager on events they are in a position to influence.

Why it matters

The proposed bill highlights the ongoing tension between federal regulators and prediction market platforms regarding the classification of their contracts, specifically how they differ from state-regulated sportsbooks. If passed, the legislation would draw a regulatory line between state-regulated sportsbooks and federally overseen derivatives markets.