Proposed Legislation Could Ban Certain Sports Prediction Markets: Discover What They Are and Why They’re Under Scrutiny

(NEXSTAR) – As the realm of sports betting expands across the United States, a significant component of this booming industry might face new challenges due to a recently proposed bipartisan bill.

On Monday, Senators Adam Schiff from California and John Curtis representing Utah introduced the “Prediction Markets are Gambling Act.” This legislation aims to address a specific facet of the extensive gambling landscape.

The lawmakers spearheading this bill express concerns that these prediction markets are skirting both state and federal regulations, thereby facilitating unlawful betting activities.

Here are the key details you need to know.

In essence, prediction markets operate just as their name suggests.

Here’s what to know.

What are prediction markets?

Prediction markets are almost exactly what they sound like.

Users are able to make bets on nearly anything. Kalshi, one of the largest prediction market platforms, allowed bets on the references President Trump would make during his State of the Union last month, for example.

As of Tuesday afternoon, Kalshi’s live markets include various sporting events, as well as what the price of Brent crude oil would be at 5 p.m. ET, the outcome of a special election in Florida, when DHS funding will be approved, and Los Angeles’ highest temperature of the day.

You can find similar offerings on the platform Polymarket, including markets regarding whether the U.S. confirms aliens exist, if Jesus will return before 2027, and how frequently Elon Musk posts to X this week.

The markets are simple to wager on. In most cases, you’re picking a winning team or between “yes” and “no” outcomes, which are known as contracts. You determine how much you want to wager, with the price usually based on the anticipated probability from the market (they typically range up to 99 cents, representing the projected outcome in percentage). The payout can vary based on the contract type, but the most common is winner-take-all.

Both Kalshi and Polymarket have signed business deals with several sports teams and leagues in order to bolster their credibility with sports fans.

What would the Prediction Markets Are Gambling Act do?

Should the bill pass, entities like Kalshi and Polymarket that are regulated by the Commodity Futures Trading Commission would be prevented from allowing wagers on sports games and events typically found in casinos, The Hill previously explained.

The prediction contracts available on these sites “are sports bets – just with a different name,” Schiff said in a statement.

However, prediction market platforms have argued they are more akin to commodity exchanges or “swaps” than gambling operations.

“If we are gambling, then I think you’re basically calling the entire financial market gambling,” Kalshi CEO Tarek Mansour told Axios last year.

Some states have taken action

Several states have preemptively banned Kalshi and Polymarket, saying that the platforms effectively are a sports betting industry with a technological twist.

Earlier this month, a judge in Nevada blocked Kalshi from operating in the state after gaming regulators argued that “futures trading” by the company and others like it is really just sports betting. Those operations are subject to regulations in the state, while prediction markets remain illegal in Nevada, according to officials.

Days earlier, Arizona became the first state to file charges against Kalshi, with the attorney general accusing the company of operating an illegal gambling business, according to NPR.

In Utah, Governor Spencer Cox has signed legislation that would add wagers on “prop bets” – typically, things that may happen during a sporting event rather than its outcome – to its list of banned gambling activities. Kalshi sued the state over the bill before Cox signed it.

Judges have ruled in Kalshi’s favor in New Jersey and Tennessee, but in favor of Nevada and Massachusetts in similar cases. In Ohio, a federal judge recently instructed Kalshi to adhere to state regulations on gambling.

What else is there to know?

Kalshi and Polymarket have found backing from the Trump-controlled Commodity Futures Trading Commission, the federal regulator of derivatives and other prediction markets activities. The CFTC’s chairman, Michael Selig, has said he would back Kalshi in any of its legal battles at the state level, arguing that federal law preempts any state law on this issue.

Any friendly decision the CFTC makes on this industry could end up financially benefiting the president’s family as well. President Trump’s son, Donald Trump Jr., has invested in Polymarket through his venture capital firm and is a strategic adviser for Kalshi.

Kalshi and Polymarket instituted new guardrails and surveillance tools on Monday. Kalshi said it would ban political candidates from trading on their own campaigns, and it would preemptively block anyone involved in college or professional sports from trading contracts related to the sports they play or are employed by.

Polymarket rewrote its rules to say clearly that users cannot trade on contracts where they might possess confidential information or could influence the outcome of an event. This would include athletes but could also include company officials, policymakers or anyone who would have enough influence to affect the outcome of an event or know the information in advance.

The Associated Press contributed to this report.