Key Points
- Democratic and Republican senators collaborated on legislation prohibiting sports and casino-style contracts on federally supervised platforms.
- The legislation seeks to modify the Commodity Exchange Act by adding restrictions on specific event-based contracts.
- Coverage extends to both collegiate and professional athletic events, plus casino gaming offerings.
- Sponsors emphasized the legislation preserves state jurisdiction over gambling regulations.
- Platform operators warn prohibition could drive users toward unregulated offshore alternatives.
Members of the United States Senate unveiled bipartisan legislation designed to prohibit sports wagering and casino-style contracts on platforms under federal regulatory oversight. The legislative initiative specifically addresses entities registered under Commodity Futures Trading Commission jurisdiction, such as Kalshi and the domestic operations of Polymarket. According to coverage by The Wall Street Journal, this marks the Senate’s inaugural concentrated legislative push against such contractual instruments.
Congressional Leaders Unveil Legislation Restricting Event Contract Markets
On Monday, Senator Adam Schiff of California and Senator John Curtis of Utah introduced legislation titled the “Prediction Markets Are Gambling Act.” The proposed statute would modify existing commodity exchange regulations to explicitly bar sports and casino-themed contracts from listed offerings. The prohibition encompasses professional athletic competitions, collegiate sports events, and traditional casino games including blackjack and roulette.
Senator Schiff contended that the CFTC has been “greenlighting these markets and even promoting their growth.” He maintained that legislative action should “eliminate this backdoor which violates state consumer protections.” Senator Curtis highlighted concerns about younger demographics gaining access to “addictive sports betting and casino-style gaming contracts.”
The legislative language explicitly preserves existing state gambling statutes and associated contractual frameworks. While maintaining state regulatory authority, it establishes federal boundaries for platforms operating under CFTC registration. The sponsors characterized their effort as a bipartisan solution addressing current regulatory deficiencies.
Platform Operators and State Authorities Dispute Regulatory Framework
A representative from Kalshi contended that prohibition measures would redirect trading “where no regulation exists” to offshore venues. The company’s statement suggested the legislative effort represents “casino interests that are threatened by competition.” Kalshi further maintained that regulated marketplace structures offer a “fairer choice” compared to traditional house-advantage models.
Companies including Kalshi and Polymarket offer binary contract markets spanning cryptocurrency, political outcomes, meteorological events, and cultural phenomena. Nevertheless, substantial trading volume has concentrated in professional and collegiate athletic events. This emphasis positions these platforms as direct competitors to established sportsbook operators such as FanDuel and DraftKings.
In February, the CFTC submitted a legal filing claiming exclusive regulatory authority over event-based contracts. The commission contended that state governments possess no jurisdictional power over federally supervised platforms. Multiple states have contested this assertion through various court proceedings.
Nevada obtained a temporary restraining order preventing specific contracts from Kalshi operations. Arizona pursued criminal prosecution against Kalshi’s corporate entities for purported unlicensed gambling activities. Kalshi contested these allegations and requested Arizona authorities withdraw the charges.
Both Massachusetts and Michigan initiated legal action against Kalshi concerning gambling-related allegations. Polymarket filed suit against Michigan seeking to block state gambling law enforcement. A Ninth Circuit judicial panel rejected Kalshi’s emergency stay application in Nevada litigation.
Trading Volume Expands Amid Mounting Legal Challenges
Professional sports organizations have expressed apprehension regarding potential market manipulation and insider information exploitation. Nonetheless, Major League Baseball executed a licensing arrangement with Polymarket granting access to official league statistics. The agreement mandates collaborative monitoring of wagering patterns.
Both Kalshi and Polymarket have pursued capital raising efforts at approximate valuations approaching $20 billion. Industry reports attribute this to expanding trading activity and increasing demand for event-based contractual instruments. Major market-making participants include Susquehanna International Group and Jump Trading.
Tradeweb Markets established a distribution partnership with Kalshi for prediction market information. This collaboration broadens institutional participant access to contract pricing data. The Senate proposal proceeds through the legislative process while legal confrontations persist across numerous jurisdictions.
