Lawmakers ramp up fight against sports betting on prediction markets

The political battle over sports betting on prediction markets is heating up as professional leagues dive deeper into the national gambling frenzy.

Lawmakers in both parties are attempting to stifle the growing popularity of sports betting on prediction markets as a top Trump administration regulator champions the new and controversial platforms.

An unlikely coalition of policymakers — ranging from staunch social conservatives to liberal critics of big business — is pushing back through legislation and litigation meant to limit where prediction markets can operate and what bets they can offer.

At the same time, major prediction market firms are deepening their roots in the sports world by signing lucrative partnerships with leagues while hemming closely to industry-friendly regulators.

“This is sad,” Rep. Alexandria Ocasio-Cortez (D-N.Y.) said of Major League Baseball’s (MLB) recent sponsorship and data-sharing agreement with Polymarket, a popular prediction market platform.

“Pervasive gambling is not good for society. It turns life into a casino, traps people in addiction and debt, surges domestic violence, and fosters manipulation,” she continued.

MLB announced last week it struck a deal with Polymarket to make the platform the league’s “Official Prediction Market Exchange” and struck a separate memorandum of understanding with the chair of the Commodity Futures Trading Commission (CFTC), the main federal agency overseeing prediction markets.

The league is also teaming up with the CFTC to help monitor prediction markets, share information confidentially and meet regularly to discuss prediction market issues.

MLB’s announcement sparked a fresh wave of blowback as concerns grow in Washington about the rise of online wagering and potential insider trading.

Sports gambling has surged in popularity and accessibility in 2018, after the Supreme Court struck down a federal law banning the practice in states without specific exemptions. The decision fueled the rise of independent online sportsbooks, such as FanDuel and DraftKings, and spurred legacy casino companies to offer their own sports betting apps.

Prediction market platforms were able to jump into the game last year after the CFTC gave Kalshi and Polymarket the go-ahead to offer a wider range of “event contracts” tied to sports outcomes.

Such platforms offer users the ability to buy event contracts tied to a specific outcome in areas ranging from sports and entertainment to global affairs and war. They argue their offerings go beyond gambling by expanding the sophisticated financial hedging techniques of Wall Street to everyday Americans.

“Traders purchase or sell these contracts at prices that reflect the probability of the underlying event and can use event contracts to hedge against economic risk,” attorneys at law firm Paul Hastings explained in an analysis.

“For example, a property owner in Louisiana could purchase an event contract predicting that a hurricane in the Gulf will reach landfall in his state to offset the risk of damage caused by the storm.”

Advocates for prediction market platforms say this is the key legal distinction between buying event contracts — which is exclusively the domain of the CFTC — and wagering on sports, which is subject to state gambling regulations.

CFTC Chair Mike Selig, a prediction industry ally, has vowed to fight several state efforts to rein in prediction markets and hold them accountable to state gambling laws.

“They provide useful functions for society by allowing everyday Americans to hedge commercial risks, like increases in temperature and energy price spikes,” Selig said last month in a video statement. “They also serve as an important check on our news media and our information streams.”

But critics say the distinctions are irrelevant to event contracts tied to sports outcomes, which have little, if any, direct financial impact beyond those involved in the contest itself.

“Sports prediction contracts are sports bets — just with a different name,” Sen. Adam Schiff (D-Calif.) said. “And yet, these contracts have been offered in all fifty states in clear violation of state and federal law.”

Schiff and Sen. John Curtis (R-Utah) introduced a bill Monday that would ban prediction market platforms from offering sports event contracts. The measure, titled the Prediction Markets Are Gambling Act, would also ban such platforms from offering casino-style games.

“Rather than enforce the law, the CFTC is greenlighting these markets and even promoting their growth,” Schiff continued. “It’s time for Congress to step in and eliminate this backdoor which violates state consumer protections, intrudes upon tribal sovereignty, and offers no public revenue.”

Curtis’s home state of Utah is one of several squaring off with prediction market companies and the CFTC.

Utah is attempting to pass a law to specifically ban prediction markets from operating in the state, where gambling of any kind is banned under its state constitution.

Other states with far friendlier relationships with gambling are also fighting prediction market companies in court.

A Nevada judge blocked Kalshi from offering sports betting in the state last week, earning praise from state officials as they seek to protect its troubled casino industry.

“Prediction markets, to the extent they facilitate unlicensed gambling, are illegal in Nevada, and we have a statutory duty to protect the public. We want people in the state to wager safely at a licensed book,” said Mike Dreitzer, chair of the Nevada Gaming Control Board.

A federal judge in Ohio also ruled last week that Kalshi must follow state gambling regulations, though federal judges in Tennessee and New Jersey have allowed Kalshi to maintain operations.

Arizona, however, has upped the ante with a criminal lawsuit against Kalshi, accusing the company of operating an illegal gambling business.

“Arizona will not be bullied into letting any company place itself above state law,” Democratic Attorney General Kris Mayes said.

Kalshi CEO Tarek Mansour has fiercely defended the company’s national operations and has accused its detractors of doing the bidding of the casino industry.

“Casino lobby hard at work,” Mansour said on social media about Schiff and Curtis’s bill to ban sports event contracts.

“There is a reason tens of millions of people use regulated prediction markets: it’s a better product. Banning just pushes this offshore, where no regulation exists. This bill isn’t about protecting consumers; it’s about protecting monopolies.”

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