US senators move to shut sports prediction markets out of betting

Two bipartisan US senators have introduced legislation aimed at banning prediction markets from offering contracts tied to sporting events, marking the first federal attempt to rein in a sector that has rapidly blurred the line between financial trading and betting.

Prediction markets allow customers to buy and sell contracts based on the outcome of a specific event, with prices rising or falling as expectations change. Because these platforms operate under federal commodities and derivatives oversight from the Commodity Futures Trading Commission (CFTC), rather than traditional state gambling laws, they have been able to reach users in jurisdictions where sports betting remains restricted or illegal.

The market has grown quickly over the past year, drawing major players such as Kalshi and Polymarket, while established betting operators including DraftKings and FanDuel have launched their own exchanges to capture demand in a fast-expanding category. That growth has attracted political scrutiny, with critics arguing the products function as unregulated betting and should be subject to state-level gambling controls.

The proposed legislation from Republican senator John Curtis and Democrat senator Adam Schiff represents the first bipartisan Senate effort to directly confront the sector. Both lawmakers have argued that the CFTC has not done enough to protect consumers from gambling-related harm, and the bill would also prohibit exchanges from offering casino-style games on their platforms.

The proposal lands amid a widening legal battle. Several states have already filed civil lawsuits seeking to force prediction markets to obtain betting licences, which would bring tighter restrictions and reduce the risk of market manipulation. Arizona escalated the conflict last week by filing criminal charges against Kalshi, accusing the company of operating an illegal sports and election betting business.

Prediction markets have responded with their own legal challenges, arguing that they are fully compliant with CFTC requirements and that states are overstepping their authority. Kalshi has also suggested the Senate push is being driven by casino lobbying, as incumbent gambling interests look to protect their market share from a disruptive new entrant.

Beyond consumer protection concerns, the industry is now confronting a broader business risk: sports integrity. Leagues and governing bodies are increasingly wary of insider trading, event manipulation and the reputational damage that can follow if prediction markets scale without clear guardrails.

Even so, partnerships continue to emerge. Major League Baseball recently struck a deal with Polymarket that includes an integrity unit designed to detect suspicious activity, underscoring how sports properties are trying to balance commercial opportunity with the need to protect competition integrity.