Rare Bipartisan Alliance: US Moves to Ban Sports Betting on Prediction Markets

Original Author: ChandlerZ, Foresight News

On March 23, Democratic Senator Adam Schiff from California and Republican Senator John Curtis from Utah jointly submitted a legislative proposal aimed at prohibiting platforms regulated by the U.S. Commodity Futures Trading Commission (CFTC) from listing contracts related to sporting events and casino-style games. This is the first bipartisan proposal in the Senate targeting the regulation of prediction markets, directly aiming at the U.S. operations of Kalshi and Polymarket.

On March 20, a U.S. federal appeals court approved a temporary restraining order from Nevada against Kalshi, preventing it from offering sports event contracts. Attorney Daniel Wallach stated that the company would be unable to operate in Nevada for at least 14 days before a preliminary injunction hearing. "Given that temporary restraining orders are not appealable under Nevada law, Kalshi will be forced to exit the state during this period." A few days earlier, Arizona had filed criminal charges against Kalshi's parent company, accusing it of operating an illegal gambling business without a license.

Over the past three months, four federal bills targeting prediction markets have been introduced in the U.S., the Arizona Attorney General has filed 20 criminal charges against Kalshi, a Massachusetts court ruled its sports contracts violate state law, and enforcement actions from states like Nevada and Tennessee, along with responses from federal agencies, are forming a multi-front regulatory battle.

What the Bill Aims to Ban, and What the Lawmakers Say

The Schiff-Curtis bill's prohibition covers two categories: contracts related to sporting events (professional leagues and college sports) and casino-style game contracts (slot machines, video poker, blackjack, bingo, etc.). Kalshi and Polymarket's trading volume is currently highly concentrated in professional and college sports, where the two platforms are in direct competition with traditional betting platforms like FanDuel and DraftKings. On Super Bowl day this year, Kalshi processed $871 million in sports-related contract volume, with the total NFL-related market volume exceeding $1 billion for the day. This scale has made several state governments realize the competition for interests is now substantial.

The two lawmakers' arguments have different emphases. Schiff points to regulatory arbitrage, stating the CFTC is giving a green light to these markets, even promoting their development. It's time for Congress to step in and close this regulatory loophole. This model violates state consumer protection regulations, infringes on tribal sovereignty, and does not generate any revenue for public finances. Curtis points to addiction risks, stating that too many young people in Utah are being exposed to addictive sports betting and casino-style game contracts. Such businesses should be regulated by the states, not federal agencies.

Schiff's mention of "tribal sovereignty" is noteworthy. Native American tribes hold legal gambling licenses in multiple states, forming a crucial part of the current state-level gambling regulatory framework and are among the stakeholders most directly impacted by prediction markets. This provides an additional source of political support for the bill beyond partisan lines.

Federal vs. States: Battling Over the Same Contracts

The emergence of the bill stems from an unresolved jurisdictional dispute. The CFTC asserts exclusive federal jurisdiction and submitted a brief to the Ninth Circuit Court of Appeals in February, claiming it has exclusive jurisdiction over commodity derivative markets, and states have no authority to intervene. Kalshi follows the same logic and has sued states like Arizona, Iowa, and Utah to try to halt state enforcement. Polymarket sued Michigan in early March for the same reason.

The states' response is to bypass the dispute and act directly. Massachusetts, Michigan, Nevada, and Arizona have taken action, arguing these contracts are essentially gambling products subject to state regulation. A Tennessee federal court sided with Kalshi, ruling its sports contracts are federally regulated swaps; a Massachusetts court ruled in the opposite direction, finding the CFTC's exclusive jurisdiction claim "overly broad." The same set of contracts has led two courts to diametrically opposite conclusions, which is the direct reason legislation is seen as the only way out.

Sports contracts are in the most vulnerable position in this dispute. The CFTC's basis for including prediction markets under the event contract framework is that such contracts serve economic functions like hedging risk and price discovery. Contracts on election results or policy directions can still be justified, but contracts on game outcomes have almost no demonstrable commercial hedging need, making the line between them and traditional gambling the hardest to draw.

MLB, Mired in Gambling Scandal, Signs Partnership with Polymarket

There's a detail in this regulatory battle worth highlighting separately. Major League Baseball (MLB) is currently embroiled in its most severe gambling scandal in decades, yet during the same period, it signed a licensing agreement with Polymarket, allowing it to serve as the league's official prediction market platform with exclusive use of MLB game data and logos. The two parties also agreed to cooperate on monitoring baseball-related wagers on the platform.

The league's logic is that sports betting cannot be stopped, and bringing it into the fold is better than letting it operate in a gray area. This stands in stark contrast to Schiff's legislative approach: one seeks to completely remove sports contracts from CFTC-regulated platforms, while the other chooses to bring prediction markets into the league's own monitoring scope through a licensing agreement.

The risks lawmakers worry about have already had precedents on Polymarket. Hours before the U.S. military launched strikes against Iran, large anonymous bets appeared on the platform, with users accurately predicting the event's outcome and cashing out hundreds of thousands of dollars. For most participants without an information advantage, the structure of sports prediction markets is highly similar to traditional gambling, with public information already priced in, and niche markets suffering from extremely poor liquidity. For participants with advance information, a platform with sufficient liquidity becomes a near-perfect arbitrage tool. This is precisely the source of match-fixing risks and the core concern of lawmakers.

The key upcoming milestones are: the Nevada 14-day hearing will determine whether the temporary restraining order becomes a permanent injunction; the Arizona criminal case goes to trial (Kalshi has written to the Attorney General pleading for charges to be dropped, with the outcome uncertain).

How far the Schiff-Curtis bill can go in the Republican-controlled Senate remains a bigger unknown. Some lawmakers have previously pointed out that because former President Trump himself profited from prediction markets, support from some Republican lawmakers on this issue has been affected.