Senate Urged to Restrict Sports Prediction Markets

The U.S. gaming industry, tribal organizations and labor unions are urging lawmakers to address sports-related prediction markets through pending cryptocurrency legislation, arguing that these platforms have expanded gambling activity beyond existing state and tribal regulatory systems.

In a letter sent to senators on June 16, a coalition that includes the American Gaming Association (AGA), the Indian Gaming Association, the National Congress of American Indians, UNITE HERE, the Hotel and Gaming Trades Council and Culinary Workers Union Local 226 called for language that would prevent prediction market operators from offering sports wagering products through federal commodities regulations.

The effort is aimed at platforms such as Kalshi and Polymarket, which have grown their sports-event contract offerings while maintaining that their products fall under federal commodities law and the oversight of the Commodity Futures Trading Commission (CFTC).

Coalition Seeks Changes to Crypto Legislation

The groups are asking lawmakers to use the CLARITY Act, a major crypto market-structure bill currently moving through Congress, to clarify that sports betting should remain outside the CFTC’s jurisdiction.

In the letter, cited by Semafor, the coalition stated: “While our organizations may differ on other issues, including gambling policy, we are united in our concern that prediction markets have fueled the largest expansion of gambling in U.S. history over the past 18 months — without voter approval or legislative authorization.”

The organizations also urged Congress to act quickly, writing: “Congress should not wait while this nationwide expansion of gambling continues. It should use crypto legislation to reaffirm a simple principle: sports betting falls outside the CFTC’s remit and cannot be offered through prediction market platforms.”

According to the coalition, sports-event contracts are functioning as gambling products while avoiding the licensing, taxation and oversight frameworks that govern sportsbooks and tribal casinos. The groups argue that sports betting has traditionally been regulated at the state level, while tribal gaming operates through agreements established under federal law and tribal-state compacts.

The AGA previously estimated that states have lost approximately $1 billion in tax revenue to prediction markets since the beginning of 2025. Prediction market operators have disputed that figure.

Regulatory Debate Expands Beyond Congress

The dispute over prediction markets is unfolding across several regulatory and legal arenas. While the Senate considers the CLARITY Act, the CFTC is separately reviewing potential changes to its approach toward event contracts.

Last week, the agency sought public comment on proposed rules covering event contracts tied to listed activities, including sports-related markets. The proposal focuses on how regulators would determine whether certain contracts conflict with the public interest.

At the same time, state officials continue to challenge the growing role of prediction markets. In May, a bipartisan coalition of 41 state attorneys general urged the CFTC to recognize state authority over sports-related event contracts, arguing that the products effectively operate as sportsbooks without state oversight.

Several states have also taken executive action related to prediction markets. New York Governor Kathy Hochul and Illinois Governor JB Pritzker issued orders restricting state employees from using confidential information in prediction markets. Similar measures have been adopted in California, Maryland, North Carolina and Wisconsin. Those actions were largely tied to concerns about insider trading, while other critics have focused on tax collection, consumer protections and regulatory authority.

Industry and Tribal Concerns Intensify

The issue has also drawn attention on Capitol Hill. During a Senate subcommittee hearing on May 20, Senator Maria Cantwell of Washington questioned AGA President and CEO Bill Miller about the effects of prediction markets on tribal gaming operations.

“Indian country is scared,” Miller responded, pointing to the 680,000 jobs supported by tribal gaming in 2025.

Separately, Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act in March. The legislation would prohibit sports and casino-style event contracts on federally registered platforms, although the bill has not advanced. Supporters of tighter restrictions now view the CLARITY Act as a more likely vehicle for addressing the issue.

The broader conflict also extends to the courts. The CFTC has challenged efforts by state regulators in New Mexico and Wisconsin, arguing that federal law grants the agency exclusive authority over registered event contracts. States have pushed back through lawsuits and enforcement actions in several jurisdictions, including Washington, Ohio, Nevada, New Jersey, Maryland, Montana, Illinois, New York, Connecticut, Arizona and Wisconsin.

Washington state’s lawsuit against Kalshi claims the company “attempts to skirt state law by branding its betting platform as a ‘prediction market.’”

Tribal groups have entered the legal debate as well. Earlier this month, a coalition filed amicus briefs in the Sixth Circuit, arguing that prediction markets threaten gaming systems established under federal law. Former CFTC Chair Gary Gensler also submitted a separate brief contending that sports-event contracts do not meet the Dodd-Frank Act definition of swaps because they are not used to hedge economic risk.

For operators such as Kalshi and Polymarket, the outcome could have significant consequences. Sports-event contracts have become an important source of trading activity, and institutional participation has increased as interest in prediction markets has grown.

The Senate Banking Committee advanced the CLARITY Act on a 15-9 vote last month. A full Senate vote has not yet been scheduled, but both supporters and opponents of prediction markets are expected to push for amendments as the legislation moves forward.