U.S. lawmakers are moving to tighten the rules around prediction markets, drawing a sharper distinction between federally regulated event contracts and what critics say increasingly resembles gambling. 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 prohibit CFTC-regulated platforms from offering contracts tied to sports outcomes and casino-style games.
A Direct Challenge to Sports and Casino-Style Event Contracts
The proposed bill is aimed at platforms operating under the oversight of the Commodity Futures Trading Commission, including Kalshi and Polymarket’s U.S. operations. At the center of the legislation is an effort to ban contracts linked to professional and college sports, as well as derivatives that resemble gambling products such as slot machines, blackjack, poker variants, and bingo.
Lawmakers backing the measure argue that these offerings blur the line between legitimate financial innovation and traditional wagering. Prediction markets have historically presented themselves as derivatives venues where users trade yes-or-no contracts on real-world events. But as these markets expanded beyond politics and macroeconomic outcomes into sports-related products, opposition from states and incumbent betting operators intensified.
Why Congress Is Stepping In
The timing reflects the rapid rise of prediction markets during and after the 2024 U.S. election cycle. What began as a niche area for political and event-based forecasting evolved into a broader market that increasingly touched territory long dominated by licensed sportsbooks and state gambling regulators.
Senator Schiff framed the issue as a regulatory end-run around state authority. In his view, federal oversight has opened a “backdoor” that allows platforms to bypass state-level consumer protections, tribal sovereignty arrangements, and tax systems tied to licensed gambling markets. Schiff has previously pushed related legislation, including the Discouraging Exploitative Assassination, Tragedy, and Harm Betting in Event Trading Systems, or DEATH BETS Act, underscoring his broader concern about the expansion of event-based wagering.
Senator Curtis emphasized the social dimension, particularly the exposure of younger users to products that look and feel similar to sports betting and casino games. His position, as reflected in the reporting, is that products with those characteristics should remain under state gambling frameworks rather than federal commodities rules.
The Regulatory Gray Zone Around Prediction Markets
One reason prediction markets have become so controversial is the regulatory structure under which they operate. Because these platforms are often structured as derivatives venues overseen by the CFTC, they may face fewer barriers than conventional sportsbooks, including lower age thresholds and fewer licensing hurdles. Critics say that difference creates an uneven playing field and permits a form of regulatory arbitrage.
State officials have increasingly pushed back, arguing that some prediction market offerings amount to unlicensed sports betting. The legal clashes have already become significant. Nevada reportedly secured a temporary restraining order against Kalshi, while Arizona filed criminal charges related to alleged illegal gambling operations. Other states, including Michigan, Massachusetts, Iowa, and Utah, are also involved in disputes over the legality of these products.
For their part, prediction market operators have argued that federal law preempts conflicting state gambling rules. That position has turned the sector into one of the most closely watched gray areas in U.S. financial and gaming regulation, with both industry economics and legal precedent at stake.
Investors Signal Support for Traditional Betting Operators
Financial markets responded quickly to the prospect of tighter restrictions. Following the news, DraftKings shares rose about 7%, while Flutter Entertainment, the parent company of FanDuel, climbed roughly 9%. The reaction suggests that investors see potential upside for established, state-licensed betting companies if federally regulated prediction platforms face new limitations.
The market move also highlights the competitive tension behind the policy debate. If event-contract platforms are allowed to offer products similar to sports wagering under a different regulatory umbrella, traditional operators risk losing market share to rivals with lighter compliance burdens. Conversely, if Congress narrows what prediction platforms can list, incumbent sportsbooks may regain some protection from emerging competition.
What the Bill Does Not Cover
Notably, the current proposal does not target political contracts or other non-sports event markets. That means a significant portion of the prediction market model could remain intact even if the legislation advances. For now, the focus is specifically on sports and casino-style contracts, where lawmakers appear to believe the resemblance to gambling is strongest and the case for federal intervention is most immediate.
The bill also remains at an early stage. At the time of the report, it had not yet received a formal bill number, and the full legislative text was still pending. Even so, the proposal marks a clear and consequential step in Washington’s broader effort to define the limits of prediction markets.
A Bigger Debate Over Financial Innovation and Gambling
The legislation arrives amid wider congressional scrutiny of prediction markets. Separate proposals are reportedly being discussed that would restrict contracts tied to government actions or prevent federal officials from trading on such platforms, reflecting concerns about manipulation, conflicts of interest, and insider advantages.
Taken together, these developments show that policymakers are no longer treating prediction markets as a fringe experiment. Instead, they are increasingly viewed as a sector with real implications for consumer protection, state authority, and the integrity of both financial and gambling regulation.
The core question remains unresolved: when does a market for forecasting real-world outcomes qualify as a financial instrument, and when does it become gambling by another name? This bipartisan Senate proposal does not settle that debate in full, but it does draw a firmer line around sports and casino-style contracts. For an industry that has benefited from regulatory ambiguity, that line could prove far less flexible in the months ahead.