New Bill Aims to Restrict Sports Betting on Prediction Markets
A bipartisan bill seeks to clarify the regulation of prediction markets, potentially banning sports betting. The legislation has sparked significant industry pushback.
A bipartisan bill introduced in the Senate on Monday aims to prohibit prediction markets from facilitating transactions that resemble sports betting. The measure, sponsored by Republican Senator John Curtis of Utah and Democrat Senator Adam Schiff of California, seeks to define the regulatory powers of state versus federal authorities regarding prediction markets.
This legislation contributes to a growing trend of state-level efforts to regulate prediction markets. Recently, a Nevada judge issued a temporary injunction preventing Kalshi, a leading company in the industry, from offering contracts related to sports events. Meanwhile, Arizona prosecutors have filed criminal charges against Kalshi for alleged illegal gambling activities.
The Trump administration has supported prediction market firms, claiming their operations are akin to stock or commodity trading, thus falling under the jurisdiction of the Commodity Futures Trading Commission (CFTC). CFTC Chairman Mike Selig has consistently defended the commission's authority over prediction markets.
Dubbed "The Prediction Markets Are Gambling Act," the new bill would modify federal law to prohibit the offering of "sports and casino-style event contracts" on platforms overseen by the CFTC. Kalshi's co-founder Tarek Mansour criticized the bill on social media platform X, suggesting it serves the interests of the casino lobby and expressing concern that it would drive such activities offshore where they would be unregulated.
Mansour and others contend that the contracts available on prediction markets should be classified as commodity market swaps, which are federally regulated. However, states are increasingly contesting this classification in court, asserting that these activities qualify as gambling and should thus be regulated at the state level.
On March 16, Arizona became the first state to file criminal charges against Kalshi, presenting a 20-count complaint for allegedly accepting illegal bets on sports and elections. Additionally, a Nevada district court recently granted gaming regulators a 14-day temporary restraining order against Kalshi, with the next hearing scheduled for April 3.
A class action lawsuit filed on March 20 in Georgia has named Kalshi and its co-founders, Mansour and Luana Lopes Lara, as defendants, claiming they knowingly listed sports event contracts in violation of the law.
Despite the ongoing regulatory challenges, the prediction market industry continues to thrive. Major League Baseball recently announced a partnership with Polymarket and has entered into an information-sharing agreement with the CFTC. Reports indicate that Kalshi has secured $1 billion in new funding.
In response to regulatory pressures, Kalshi announced new measures on Monday aimed at preventing insider trading and market manipulation, including a ban on trading for athletes, employees, and referees involved in college and professional sports within specific markets.