In a coordinated push on the final day of the Commodity Futures Trading Commission’s (CFTC) comment period for prediction market rulemaking, a group of Senate Democrats sent a letter demanding the agency issue rules banning event contracts on elections, war, military actions, sports, and government actions—unless tied to a legitimate economic hedging interest. The letter, filed on April 30, 2026, escalates the regulatory pressure on platforms like Kalshi and Polymarket.
Five Contract Categories in the Crosshairs
The lawmakers, led by Senator Jeff Merkley (D-Ore.), argued that prediction markets are experiencing a “rapid erosion of integrity” following recent controversies. They urged the CFTC to use its statutory authority to prevent insider trading and prohibit several broad categories of event contracts. Specifically, election-related contracts create a financial incentive for political insiders to subvert voter intent, while sports-event contracts represent gambling that intrudes on state regulatory authority.
The dominance of sports contracts is striking. According to a Congressional Research Service insight published last month, sports contracts accounted for approximately 87% of the $39.7 billion traded on Kalshi in the year ending February 2026. On Polymarket, sports comprised 38% of the $36.2 billion volume over a comparable window. A ban on sports contracts would severely disrupt the business models of both platforms.
CFTC Chair’s Stance and State-Federal Tensions
The Democratic letter contrasts sharply with the current CFTC posture under Chair Michael Selig. In a recent interview, Selig identified manipulation and insider trading as “the biggest issue” in prediction markets but emphasized that exchanges, as self-regulatory organizations, should be the first line of defense. He said the CFTC could reject contracts and police fraud, and did not rule out future restrictions on prop bets and parlays once final rules are issued.
Meanwhile, the CFTC has been aggressively asserting exclusive federal jurisdiction over event contracts. On April 2, the agency sued Arizona, Connecticut, and Illinois, followed by lawsuits against New York (April 24) and Wisconsin (April 28), alleging that states are encroaching on federal authority by attempting to enforce gambling laws against CFTC-registered exchanges. The Third Circuit Court of Appeals affirmed an injunction barring New Jersey from enforcing its gambling laws against Kalshi’s sports-event contracts on April 6. In the most aggressive state action to date, Arizona filed a 20-count criminal information against Kalshi’s CFTC-registered exchange, which was temporarily stayed by the courts.
Legislative Bills and Insider Trading Case
Several legislative proposals targeting prediction markets have been introduced this year. On March 26, Merkley, Senator Elizabeth Warren (D-Mass.), and Representative Jamie Raskin (D-Md.) introduced the STOP Corrupt Bets Act, which would prohibit federally regulated event contracts on elections, sports, government actions, and military moves. A separate bipartisan bill from Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah) would block CFTC-registered platforms from offering sports-event contracts.
The push for a ban follows a high-profile insider trading case. In January, U.S. Army Sergeant Gannon Ken Van Dyke was indicted for trading on Polymarket using nonpublic information about the U.S. military operation that captured Venezuelan leader Nicolás Maduro. He pleaded not guilty earlier this week. Democrats cited this case as a clear example of the risks posed by unregulated prediction markets.
Adding to the scrutiny, Warren Buffett used his first sit-down interview since stepping down as Berkshire Hathaway CEO to denounce prediction markets and legalized sports betting as a “tax on stupidity,” further amplifying public skepticism.