U.S. lawmakers are preparing new legislation aimed at restricting sports-related contracts on federally regulated prediction markets, signaling growing concern over the overlap between derivatives trading and sports betting.
According to reports from The Wall Street Journal, Adam Schiff, a Democratic senator from California, and John Curtis, a Republican senator from Utah, plan to introduce a bipartisan bill that would prohibit platforms regulated by the Commodity Futures Trading Commission (CFTC) from listing contracts tied to sporting events.
The proposed legislation would directly affect prediction-market exchanges such as Kalshi and the U.S. operations of Polymarket, which allow users to trade contracts based on the outcome of future events. These platforms operate under derivatives market frameworks rather than traditional gambling regulations, enabling users to speculate on outcomes ranging from political elections to economic indicators.
Lawmakers backing the bill argue that sports-related prediction markets blur the line between financial trading and gambling. Schiff criticized the regulatory environment surrounding such contracts, saying that the CFTC has effectively allowed the markets to expand without adequate oversight.
“The CFTC is greenlighting these markets and even promoting their growth,” Schiff said, adding that Congress must step in to close what he described as a regulatory loophole.
He further argued that sports-based event contracts function as a “backdoor” around state consumer protection laws and gambling regulations. Schiff also noted that the markets could undermine tribal sovereignty, a key element of gambling regulation in several U.S. states where Native American tribes operate casinos under specific legal frameworks.
The proposal comes amid increased scrutiny of prediction markets in Washington, where regulators and lawmakers are debating whether event-based derivatives resemble traditional financial instruments or unregulated forms of wagering.
Supporters of prediction markets argue that they provide valuable forecasting tools and market signals. However, critics maintain that contracts tied to sports outcomes closely resemble sports betting and should fall under state gaming laws rather than federal derivatives oversight.
If passed, the legislation could significantly reshape the rapidly evolving prediction-market sector in the United States and limit the types of contracts available on CFTC-regulated platforms.
