Group 23 Democratic U.S. senators sent a letter to the top federal regulator that oversees prediction markets on Friday, urging the agency to avoid assessing ongoing lawsuits over the legality of offerings on platforms related to “sports, war and other prohibited events.”
Prediction markets, which sell contracts tied to the outcomes of real-world events, have grown in popularity over the past year, attracting a growing crowd of mainstream fans eager to bet on everything from geopolitical conflicts to fashion choices to the Super Bowl. As the platforms have developed, they have become a magnet for ethical and legal controversy. On Thursday, for example, Israeli authorities announced that two people had been arrested on charges of using classified military information for intelligence purposes place bets on Polymarket, one of the largest players in the industry.
The senators’ letter reflects a growing divide over the treatment of Polymarket and competitors like Kalshi. The United States government currently considers forecast markets to be derivatives markets, which means they fall under the jurisdiction of the Commodity Futures Trading Commission. State authorities, who have emerged as some of the industry’s fiercest critics, argue that the platforms should be subject to the same local regulations as gambling products.
He said there are at least 19 ongoing federal cases challenging Kalshi’s legality analysis by National Public Radio. In one case in Massachusetts, a judge issued an injunction business from offering sports contracts after the state sued it for operating without a gambling license. Polymarket then filed an application counterclaim v. Massachusetts, arguing that state regulators had no authority over its activities.
In his first public comments on forecast markets since taking office in December, CFTC Chairman Michael Selig suggested that the agency could step into the dispute, noting that it has “the expertise and responsibility to defend its exclusive jurisdiction.”
Now a group of senators led by Adam Schiff of California is urging the CFTC to stay out of state lawsuits. Their letter also asks the agency to prohibit prediction markets from offering gaming contracts, as well as contracts involving “war, terrorism, assassination or other enumerated activities.” The signatories are Cory Booker, Amy Klobuchar and Ron Wyden. The CFTC did not respond to requests for comment.
Under the Biden administration, the CFTC has tried to put barriers on certain aspects of the prediction markets. For example, in 2024, an independent agency proposed a ban on the sale of certain types of contracts, including those related to sports and politics.
However, under the Trump administration, the CFTC took a radically different approach. After Selig took power in December, the CFTC moved quickly he withdrew proposal for a ban and established a up-to-date advisory board, which includes the CEOs of all the largest companies in the forecasting market. And when former Modern Jersey Gov. Chris Christie suggested on social media this week that prediction markets were violating the law, Selig issued a terse statement: answer: “I strongly disagree.”
I’m commenting on Bloomberg’s Odd Lots podcast this week, Selig detailed his vision for regulating the industry, rejecting the notion that prediction markets should be viewed as equivalent to sports gambling. “It’s not betting – you’re not betting against the house,” he said. “From a regulatory point of view, we have significant influence over these markets. That’s why we don’t limit specific categories of markets, choices or sports by applying different standards.”
In their letter, the senators urged Selig to change course. “These products defy state and tribal consumer protections, generate no public revenues, and undermine sovereign regulatory systems,” the senators wrote.
Meanwhile, proponents of the prediction market industry say the CFTC is already on the right track. “We think the chairman is absolutely right to affirm the agency’s exclusive jurisdiction over the state,” says former U.S. Rep. Sean Patrick Maloney, who now heads the lobbying group Coalition for Prediction Markets. “No state gaming commission will ever have the authority to provide overall oversight of derivatives markets.”
As the regulatory fight over prediction markets continues, more companies are trying to get in on the action. Many online sports gambling companies, including DraftKings, have recently unveiled their own offerings. Truth Social, the social media company majority-owned by President Donald Trump and his family, is also preparing its own product called Truth Predict. Expected offers include the possibility of “events across all major sports leagues.”