Prediction Markets Face Federal Crackdown After Senate Hearing

⏱ 3 min read

On Wednesday, 20 May 2026, the U.S. Senate Commerce Subcommittee on Consumer Protection, Technology and Data Privacy convened a hearing titled "No Sure Bets: Protecting Sports Integrity in America" — the most significant congressional examination of sports gambling since the Supreme Court struck down PASPA in 2018. Chaired by Sen. Marsha Blackburn (R-Tenn.), the session rapidly became a referendum on whether prediction market platforms like Kalshi and Polymarket are operating as unlicensed sportsbooks under the cover of federal commodities law.

The numbers that drove senators to the table are stark. Sports-related trading on Kalshi totalled just $227,000 in 2024. By May 2026 it accounts for roughly 86% of the platform's business, generating more than $47 billion in trading volume so far this year. Kalshi's valuation has risen to $22 billion. In response, the American Gaming Association (AGA) spent $730,000 on lobbying related to prediction markets in Q1 2026 alone — its heaviest single-quarter outlay in over a year.

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Hearing Backdrop: Why Now

Prediction markets occupy a legal grey zone that traditional sportsbooks and state regulators have long resented. Unlike DraftKings, FanDuel, and other state-licensed books, platforms registered as Designated Contract Markets (DCMs) with the Commodity Futures Trading Commission (CFTC) can offer sports event contracts in all 50 states — including those that have not legalised sports betting. A coalition of 41 state attorneys general wrote to Congress before the hearing urging regulatory clarity.

Recent scandals compounded the urgency. Allegations surfaced that a cluster of new accounts on Polymarket made highly specific bets on a U.S.–Iran ceasefire on 7 April 2026, generating hundreds of thousands of dollars in profits — triggering insider-trading concerns. In the same period, Kalshi fined and suspended three congressional candidates caught wagering on the outcomes of their own elections. Kalshi also drew criticism for sponsoring a 15-year-old streamer, putting youth-targeted advertising squarely in senators' sights.

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AGA vs. Prediction Markets: The Core Dispute

AGA President and CEO Bill Miller delivered the hearing's most quoted line: prediction markets are "repackaging sports betting as financial products" while bypassing 8,400 state and tribal gaming regulators, responsible-gambling obligations, and tax frameworks. He argued that sports event contracts "function as sports betting in every meaningful sense."

The counter-argument came from Patrick McHenry, former chair of the House Financial Services Committee and now senior adviser to the Coalition for Prediction Markets. McHenry contended that exchange-based platforms operate within a transparent federal structure, earn transaction fees rather than profiting from customer losses, and that the CFTC already provides thorough oversight. He urged lawmakers to study the market before acting.

• Sen. John Hickenlooper (D-Colo.) and Miller both labelled the CFTC as unfit to regulate what is effectively a gambling product.
• Sen. Ted Cruz (R-Texas) called for sports leagues, casinos, and regulators to work together to root out manipulation.
• Chair Blackburn declared the hearing the first of "several" planned sessions, signalling that federal action is a matter of when, not if.

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Three Competing Bills, One Regulator in the Crosshairs

Three distinct legislative approaches are jostling for momentum following the hearing.

• Prediction Markets Are Gambling Act — an outright ban on live-event wagering contracts on CFTC-regulated platforms.
• Prediction Markets Security and Integrity Act — requires platforms to register with the CFTC and meet the same AML and consumer-protection standards imposed on licensed sportsbooks.
• Schiff–Curtis bill (bipartisan, Sen. Adam Schiff D-Calif. / Sen. John Curtis R-Utah) — amends the Commodity Exchange Act to prohibit CFTC-registered platforms from listing sports event or casino-style contracts, while preserving prediction markets for legitimate financial hedging.

Separately, Rep. Ritchie Torres (D-N.Y.) introduced the Campaign Funds Integrity Act of 2026, which would impose up to five years' imprisonment for using campaign funds to bet on prediction markets.

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Bills at a Glance

Bill	Sponsors	Approach	Impact on Kalshi / Polymarket	Impact on Sportsbooks
Prediction Markets Are Gambling Act	TBD	Outright ban on live-event contracts	Sports / casino products eliminated	Highly positive — removes direct competition
Prediction Markets Security & Integrity Act	TBD	CFTC registration + sportsbook-level compliance	Significant compliance costs; sports products survive	Levels playing field; state tax revenue unresolved
Schiff��Curtis Amendment	Adam Schiff (D-CA) / John Curtis (R-UT)	Ban sports & casino contracts only; preserve financial hedging	Sports / casino products banned; political markets intact	Positive; DraftKings & Flutter rose ~8% on introduction
Campaign Funds Integrity Act of 2026	Rep. Ritchie Torres (D-NY)	Criminal penalties for using campaign funds on markets	Reputational risk; narrow scope	Neutral

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What This Means for Operators and Bettors

For licensed operators in the UK, US, and India, the hearing is unambiguously good news in the short term. DraftKings (DKNG) and Flutter Entertainment shares each jumped around 8% when the Schiff–Curtis bill was first announced in March, and renewed legislative momentum should sustain that sentiment. Any federal move that confines sports wagering to state-regulated channels strengthens the moat around established licences.

For bettors, the stakes are access and price. Prediction market platforms have offered sharper lines and lower vig than traditional sportsbooks on certain markets. A ban on sports contracts would funnel that volume back into incumbent books, reducing competition — and potentially odds.

• Users in the 28 states without legal sports betting currently access sports event contracts on Kalshi legally. A congressional ban would close that avenue immediately.
• Platforms like DraftKings Predictions and FanDuel Predicts, which have launched their own prediction market products, may face a forced choice between those products and their state licences.
• The CFTC itself is in the crosshairs: multiple senators questioned whether the commission has the mandate or expertise to police what is functionally a gambling market.

Chair Blackburn has indicated further hearings are planned. With a coalition of 41 state AGs, the AGA, and bipartisan Senate co-sponsors aligned against the status quo, the regulatory window for Kalshi and Polymarket's sports products is narrowing fast.

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Sources

Primary sources and contemporaneous reporting used in this article, listed in order of authority.

Prediction markets are repackaging sports betting as financial products while bypassing the regulatory systems specifically designed to oversee it responsibly.

— Bill Miller, President & CEO, American Gaming Association · U.S. Senate "No Sure Bets" Hearing, 20 May 2026