US Senate bill seeks to ban sports betting on prediction markets

• Bipartisan legislation introduced by Senators Adam Schiff and John Curtis aims to ban sports betting and casino-style contracts on regulated prediction markets.
• The bill targets platforms like Kalshi and Polymarket, seeking to prohibit markets tied to sporting events, poker, blackjack, and slots.
• Proponents argue the measure is necessary to protect state consumer laws, tribal sovereignty, and prevent addiction among young users.
• The move comes as prediction markets seek valuations of up to $20 billion despite escalating legal battles with state regulators.

Federal Oversight and Legislative Action

U.S. Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah) are spearheading a new legislative push to restrict the scope of federally regulated prediction markets. The proposed bill would specifically bar platforms overseen by the Commodity Futures Trading Commission (CFTC) from offering event contracts linked to professional or collegiate sports and traditional gambling games like bingo and poker.

Senator Schiff expressed concerns that the CFTC is currently facilitating the growth of these markets through a "backdoor" that bypasses state protections and fails to generate public revenue. Senator Curtis echoed these sentiments, highlighting the risks of addictive gaming contracts being accessible to young people under federal rather than state-level control.

A Growing Jurisdictional Conflict

The legislation arrives amid a sharpening divide between federal regulators and individual states. While the CFTC has asserted exclusive jurisdiction over event contracts as derivatives, several states have launched aggressive legal challenges:

• Nevada recently obtained a temporary restraining order to stop Kalshi from offering contracts on sports and elections.
• Arizona has filed criminal charges against Kalshi’s parent entities, alleging the operation of an unlicensed gambling business.
• Massachusetts and Michigan have also initiated litigation, while Polymarket has sued Michigan to prevent the enforcement of state-level gambling laws.

Market Expansion and Institutional Interest

Despite the tightening regulatory environment, the prediction market sector is experiencing a period of rapid growth. Both Kalshi and Polymarket have reportedly explored funding rounds at valuations near $20 billion, driven by massive trading volumes. The industry has also attracted significant institutional players, including Susquehanna International Group and Jump Trading, which serve as market makers.

Furthermore, the intersection with professional sports continues to evolve. While the new bill seeks to limit sports-related contracts, organizations like Major League Baseball (MLB) have already entered the space, recently signing a licensing deal with Polymarket to provide data while establishing monitoring protocols to prevent insider manipulation.