U.S. lawmakers are moving to draw a firmer line between regulated financial contracts and what they argue increasingly resembles gambling. A bipartisan proposal introduced on March 23 by Senators Adam Schiff of California and John Curtis of Utah would block federally regulated prediction market platforms from listing contracts tied to sports and casino-style games. The effort, reported by The Wall Street Journal and Sports Business Journal, targets platforms overseen by the Commodity Futures Trading Commission (CFTC), including Kalshi and Polymarket’s U.S. operations.
A Narrow but Significant Legislative Target
At the center of the bill is a proposed ban on event contracts linked to professional and college sports, as well as derivatives that resemble casino games such as slot machines, blackjack, poker variants, and bingo. Lawmakers backing the measure argue that these products are no longer easily distinguishable from conventional betting offerings, even if they are structured and marketed as financial instruments.
That distinction matters because prediction markets operate under a different federal framework than traditional sportsbooks. Rather than being licensed at the state level as gambling businesses, they generally function as derivatives platforms under CFTC oversight. In practice, critics say this structure has allowed prediction market operators to enter areas that look very similar to sports wagering while facing fewer licensing burdens and, in some cases, lower age-related barriers than state-regulated betting operators.
Why Congress Is Intervening Now
The timing reflects the rapid rise of prediction markets over the past two years. The sector gained broad visibility during the 2024 U.S. election cycle, when event-based contracts on political outcomes drew heavy user participation and public attention. After that momentum, some platforms expanded into sports-related markets, intensifying concerns among state regulators and established sportsbook companies.
Senator Schiff framed the issue as a regulatory end-run around state authority. According to the reporting, he argued that federal oversight has effectively opened a “backdoor” that bypasses state consumer protections, tribal sovereignty arrangements, and tax revenue structures tied to licensed gambling systems. Schiff has previously taken a hard line on controversial event contracts, including introducing the Discouraging Exploitative Assassination, Tragedy, and Harm Betting in Event Trading Systems Act, or the DEATH BETS Act.
Senator Curtis focused more on the social dimension, especially the exposure of younger users to products that may function like sports betting or casino gambling in all but name. His position is that such offerings should remain under state control rather than within the federal commodities framework.
State Regulators and Platforms Are Already in Conflict
The legislation arrives in the middle of an active legal and regulatory struggle. Several states have argued that prediction platforms offering sports-related contracts are effectively operating as unlicensed sportsbooks. Nevada has already secured a temporary restraining order against Kalshi, while Arizona has pursued criminal charges connected to alleged illegal gambling operations. Other states, including Michigan, Massachusetts, Iowa, and Utah, are also involved in disputes over the legality of these products.
Prediction market firms, however, have pushed back by arguing that federal law preempts conflicting state gambling restrictions when their contracts fall within CFTC-regulated territory. That clash has turned the sector into one of the most contested regulatory gray zones in U.S. finance and gaming policy. The core question is whether the contracts should be treated primarily as financial risk instruments or as a new wrapper for gambling activity.
Market Reaction Signals Competitive Stakes
Investors appeared to view the bill as potentially favorable for incumbent gaming firms. Following news of the proposal, shares of DraftKings rose about 7%, while Flutter Entertainment, the parent company of FanDuel, gained roughly 9%. The move suggested that equity markets see upside for traditional sportsbook operators if newer prediction-market competitors are restricted or pushed out of sports-related offerings.
The reaction also underscored how much is at stake commercially. If prediction markets can continue listing sports contracts under federal oversight, they could challenge established betting businesses by operating under a different regulatory cost structure. If Congress narrows that pathway, legacy gaming groups may regain some protection from emerging competition.
Political Contracts Remain Untouched for Now
One notable feature of the proposal is what it does not do. The bill does not currently seek to ban political contracts or other non-sports event markets. That leaves a meaningful portion of the broader prediction market model intact, at least at this stage. Even so, the measure forms part of a wider congressional examination of event-based trading markets. Separate legislative efforts have sought to limit contracts tied to government actions or to prevent federal officials from participating in such markets, reflecting broader concerns about manipulation, conflicts of interest, and information asymmetry.
In that sense, the sports and casino-style ban may represent only one front in a larger debate over the future of prediction markets in the United States. Critics argue the platforms can distort incentives, exploit legal loopholes, and undermine state policy frameworks. Supporters counter that these markets can provide useful price discovery and public forecasting tools when properly regulated.
An Early Proposal With Broader Implications
The current measure has not yet been assigned a formal bill number, and full legislative text is still pending. Even so, its introduction marks an important signal from Congress. Lawmakers are no longer treating prediction markets as a niche innovation operating at the margins of financial regulation. Instead, they appear increasingly willing to define where financial innovation ends and gambling begins.
For companies that have benefited from that ambiguity, the implications could be significant. A targeted ban on sports and casino-style contracts would not end the prediction market industry, but it could reshape its growth path in the U.S. by narrowing the most commercially contentious categories. Whether the proposal advances or is revised, it has already intensified a debate that sits at the intersection of crypto-adjacent market design, derivatives regulation, and the politics of gambling law.