Congress is stepping into the fast-growing prediction market arena, aiming to draw a hard line between financial contracts and what lawmakers say looks a lot like gambling. According to reporting from the Wall Street Journal and Sports Business Journal, U.S. Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah) introduced bipartisan legislation on March 23, 2026, that would block federally regulated prediction platforms from offering contracts tied to sports and casino-style games. The proposal targets firms overseen by the Commodity Futures Trading Commission (CFTC), including Kalshi and Polymarket’s U.S. operations.
Core Provisions: Banning Sports and Casino Contracts
At its core, the bill seeks to prohibit event contracts linked to professional and college sports, along with derivatives resembling slot machines, blackjack, poker variants, and bingo. Lawmakers argue these offerings blur the line between financial markets and traditional gambling. Schiff framed the issue as a regulatory workaround that undermines state authority. He said federal regulators have effectively opened a “backdoor” that bypasses consumer protections, tribal sovereignty, and public tax revenue tied to state-licensed gambling systems. Notably, Schiff previously introduced the DEATH BETS Act targeting assassination-related event contracts.
Curtis, meanwhile, emphasized social concerns, pointing to increased exposure among younger users. He argued that products resembling sports betting and casino games should remain under state control rather than federal commodities oversight.
Regulatory Gray Zone Intensifies
Prediction markets operate as derivatives platforms, allowing users to trade yes-or-no contracts tied to real-world outcomes. Because they fall under CFTC jurisdiction, they often carry fewer restrictions than traditional sportsbooks, including lower age thresholds and fewer licensing hurdles. States have pushed back, arguing these platforms function as unlicensed sportsbooks. Recent clashes include Nevada securing a temporary restraining order against Kalshi and Arizona filing criminal charges tied to alleged illegal gambling operations. Several other states—including Michigan, Massachusetts, Iowa, and Utah—are involved in ongoing disputes, with prediction platforms countering that federal law preempts state gambling rules.
Market Reactions and Broader Scrutiny
Financial markets reacted quickly. DraftKings shares climbed about 7%, while Flutter Entertainment, parent of FanDuel, rose roughly 9%, suggesting investors see potential upside if new competition is curtailed. The legislation arrives alongside broader congressional scrutiny of prediction markets. Separate proposals aim to restrict bets tied to government actions or prevent federal officials from trading on such platforms, reflecting concerns about alleged manipulation and insider advantage.
Notably, the current bill does not target political contracts or other non-sports events, leaving a significant portion of the prediction market model intact—at least for now. With no formal bill number yet assigned and full text still pending, the proposal marks an early but decisive attempt to define where financial innovation ends and gambling begins. For an industry that has thrived in the gray areas, that boundary may soon get a lot less flexible.