US Senators Adam Schiff and John Curtis are set to introduce a bipartisan bill on Monday aimed at banning sports betting and casino-style contracts from prediction markets regulated by the Commodity Futures Trading Commission (CFTC), according to a report by The Wall Street Journal.
Addressing Concerns Over Young Gamblers
Senator Curtis, a co-sponsor of the bill, emphasized the need to protect young people from the allure of addictive sports betting and casino-style gaming contracts. ‘Too many young people in Utah are getting exposed to these activities, which should be under state control, not federal regulators,’ Curtis told the WSJ.
Regulatory Scrutiny Intensifies
The bill is part of a broader push in Washington to increase oversight of prediction markets. This comes on the heels of renewed insider trading concerns following the US-Israeli conflict with Iran. On March 10, Schiff introduced the DEATH BETS Act, which seeks to prohibit CFTC-regulated prediction markets from listing contracts tied to war, terrorism, assassination, and individual death.
Sports Betting Drives Trading Volume
Sports betting is a significant driver of trading activity on prediction market platforms. According to data from Dune Analytics, sports-related contracts accounted for 47.7% of Polymarket’s weekly notional volume and 78.8% for Kalshi. These platforms saw $1.2 billion and $2.6 billion in weekly notional trading volume, respectively.
State and Federal Jurisdiction Blurs
The regulatory landscape is becoming increasingly complex. On March 12, the CFTC issued a staff advisory classifying event contracts on prediction markets as a financial asset class. The CFTC also submitted an Advanced Notice of Proposed Rulemaking to gather public feedback on how the Commodity Exchange Act (CEA) would apply to prediction markets.
However, the jurisdictional lines between state and federal regulators are blurring. On March 9, an Ohio judge ruled that Kalshi failed to demonstrate that the CEA would preempt Ohio’s sports gambling laws. This decision challenges the CFTC’s claim of exclusive jurisdiction over prediction markets. On Friday, a Nevada judge temporarily blocked Kalshi from offering sports, election, and entertainment event contracts in the state for 14 days, citing violations of Nevada gambling law.
Forward-Looking Insight
The introduction of this bill and the ongoing regulatory scrutiny highlight the growing tension between federal and state authorities over the regulation of prediction markets. As the industry continues to evolve, it is clear that lawmakers and regulators are taking a more cautious and proactive approach to ensure consumer protection and market integrity. The future of prediction markets will likely depend on how these regulatory challenges are addressed and resolved.
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