U.S. lawmakers are taking a more direct aim at the fast-expanding prediction market industry, arguing that some event contracts now look far more like gambling than financial instruments. According to reporting cited from The Wall Street Journal and Sports Business Journal, Senators Adam Schiff of California and John Curtis of Utah introduced bipartisan legislation on March 23 that would block federally regulated prediction platforms from listing contracts tied to sports and casino-style games.
The proposal targets platforms overseen by the Commodity Futures Trading Commission (CFTC), a category that includes Kalshi and Polymarket’s U.S. operations. At the center of the debate is whether event-based contracts—especially those tied to professional sports, college sports, and casino-like outcomes—should be treated as legitimate derivatives or as a regulatory workaround for gambling.
A Push to Draw a Clearer Line
The reported bill would prohibit contracts linked to professional and college sports as well as derivatives resembling slot machines, blackjack, poker variants, and bingo. Supporters of the measure argue that these products blur the boundary between prediction-based financial markets and traditional betting markets already regulated at the state level.
That boundary has become more contested as prediction markets grew rapidly during the 2024 U.S. election cycle and then expanded into sports-related contracts. What began as a niche area for trading on political and economic outcomes increasingly attracted attention from users interested in wagering on mainstream events. That evolution also drew the attention of state regulators and licensed sportsbook operators, both of whom see federally regulated event contracts as a growing challenge to existing gambling frameworks.
Federal Oversight vs. State Gambling Authority
Prediction markets typically allow users to buy and sell yes-or-no contracts based on real-world outcomes. Because they often operate under CFTC oversight as derivatives venues, they may face fewer restrictions than conventional sportsbooks, including lower barriers tied to licensing and, in some cases, lighter age-related constraints. Critics say this has created a loophole that lets platforms offer gambling-like products without complying with the full set of state gambling laws.
Senator Schiff reportedly framed the issue as a “backdoor” around state authority. His criticism centers on the idea that federal regulators have effectively enabled products that bypass consumer protections, tribal sovereignty arrangements, and the tax structures connected to state-licensed gambling systems. Schiff has also previously backed legislation known as the DEATH BETS Act, aimed at discouraging speculative markets tied to assassinations, tragedies, and harmful events.
Senator Curtis emphasized social concerns, particularly the possibility of increased exposure among younger users. In his view, products that function and feel like sports betting or casino games should remain under state control rather than falling under federal commodities regulation.
Legal Battles Are Already Underway
The legislative push comes as prediction markets face mounting resistance from U.S. states. Regulators in several jurisdictions have argued that these platforms operate as unlicensed sportsbooks, regardless of how the contracts are labeled under federal law. That conflict has produced an increasingly visible legal fight over who has the authority to define and regulate these products.
Among the most notable recent cases, Nevada secured a temporary restraining order against Kalshi, while Arizona filed criminal charges tied to alleged illegal gambling operations. Other states named in ongoing disputes include Michigan, Massachusetts, Iowa, and Utah. In response, prediction market operators have argued that federal law preempts state gambling rules, placing the industry in a legal gray zone with rising commercial and regulatory stakes.
This struggle is not just about one or two platforms. It reflects a broader question: when a market is structured as a derivative but behaves like a wager, which regulatory regime should apply? Congress now appears ready to weigh in more forcefully on that question.
Immediate Market Reaction
Public markets reacted quickly to the news. Shares of DraftKings rose about 7%, while Flutter Entertainment, the parent company of FanDuel, gained roughly 9%. The move suggests that investors see potential upside for traditional, state-licensed betting operators if federally regulated prediction platforms are prevented from expanding further into sports and casino-style products.
The reaction also highlights how prediction markets are no longer a niche policy topic. They are now seen as a competitive issue for established gambling businesses, a legal issue for state regulators, and a policy issue for Congress and federal agencies.
What the Bill Does Not Cover
Importantly, the current proposal does not reportedly ban political contracts or other non-sports event contracts. That leaves a substantial part of the prediction market model intact, at least for now. In other words, the bill appears focused on the areas where lawmakers believe the overlap with gambling is most obvious, rather than trying to shut down the entire prediction market sector.
At the same time, the Senate proposal arrives amid broader congressional scrutiny of event trading platforms. Separate legislative ideas are said to include restrictions on markets tied to government actions and measures that would prevent federal officials from trading on such platforms. Those efforts reflect wider concerns about manipulation, conflicts of interest, and possible information advantages.
An Early but Meaningful Regulatory Signal
As of the report, the bill had not yet received a formal number and full legislative text was still pending. Even so, the proposal sends a clear signal: lawmakers are increasingly unwilling to let prediction markets expand into areas traditionally governed as gambling without a direct policy response.
For the industry, this could mark the beginning of a more defined regulatory era. Prediction markets have benefited from ambiguity—especially where financial innovation, public interest forecasting, and wagering culture overlap. But if Congress moves to narrow that ambiguity, the business models of major platforms could face meaningful limits in the U.S. market.
Whether the legislation advances or is modified, the debate has already crystallized around a central issue: where does legitimate event-based financial trading end, and where does gambling begin? For companies operating in that overlap, the answer may soon become much less flexible.