What to know:
- Gaming groups urged Congress to restrict sports prediction markets nationwide.
- Industry organizations challenged CFTC authority over sports wagering contracts.
- Kalshi and Polymarket face scrutiny despite strong trading volumes.
Major U.S. gaming organizations are pressing lawmakers to restrict sports betting prediction markets through pending crypto legislation, arguing that the products operate outside established gambling regulations and consumer protection frameworks.
According to a report by Semafor, several industry groups sent a letter to the Senate requesting language that would explicitly prohibit sports-related prediction contracts and casino-style wagering on prediction market platforms. The organizations argued that these products have expanded nationwide while avoiding the oversight standards applied to traditional gambling operators.
The letter was signed by the American Gaming Association, the Indian Gaming Association, and the Association of Gaming Equipment Manufacturers. Together, the groups claimed that prediction markets have contributed to a major expansion of gambling activity without direct authorization from voters or lawmakers.
Industry representatives said sports event contracts allow platforms to offer betting products nationwide while bypassing state and tribal gaming laws. Consequently, they believe these markets weaken consumer protections and undermine regulatory systems that generate tax revenue and support local communities.
Moreover, the groups argued that prediction market operators often present gambling products as financial investments. They warned that younger participants could face greater risks because responsible gaming safeguards remain less developed than those found in traditional betting markets. T
he organizations also questioned the role of the Commodity Futures Trading Commission in overseeing these products. They argued that Congress should make clear that sports betting falls outside the agency’s intended authority.
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Gaming Industry Seeks Changes to Crypto Legislation
The request arrives as lawmakers continue debating the Clarity Act, which remains the primary crypto market structure proposal in Congress. The Senate Banking Committee advanced the legislation last month, bringing it closer to a vote before the full Senate.
Gaming groups are now urging lawmakers to use the bill to establish clear limits on sports-related prediction contracts. They argue that federal financial regulations should not serve as an alternative route for sports wagering products that would otherwise fall under state gambling laws.
Meanwhile, prediction markets continue attracting significant trading activity across the United States. Participation surged during the 2024 election cycle and remains elevated ahead of the upcoming midterm elections.
However, the industry’s rapid growth has generated increasing political and legal opposition. Earlier this year, Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act, which seeks to prohibit sports and casino-related prediction contracts from being listed on registered platforms.
States and Regulators Clash Over Market Oversight
Several states have already taken action against major operators Kalshi and Polymarket. State regulators argue that the companies violated local gambling laws by offering sports-related contracts to residents without proper authorization.
At the same time, the CFTC has defended its authority over prediction markets. The agency has filed lawsuits against several states, including Wisconsin, Illinois, Arizona, Connecticut, New York, and New Mexico, in an effort to preserve federal oversight.
Additionally, regulators recently proposed rules that would support sports-related prediction markets while restricting contracts tied to terrorism, assassinations, and war. Kalshi and Polymarket remain the sector’s largest operators.
Kalshi recorded $16.81 billion in trading volume during May, compared with $14.81 billion in April. Polymarket generated $7.08 billion in monthly volume, although that figure declined from $9.01 billion recorded a month earlier.
Conclusion
The debate over sports betting prediction markets is becoming a significant issue within crypto legislation. As Congress considers market structure reforms, gaming organizations are pushing for restrictions that could influence how prediction market platforms operate across the United States.
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