Senators Plan Bipartisan Bill to Bar Sports‑Betting Contracts From CFTC‑Regulated Prediction Markets
Washington – On Monday, U.S. Senators Adam Schiff (D‑CA) and John Curtis (R‑UT) are expected to file a bipartisan proposal that would prohibit “casino‑style” contracts and sports‑betting offerings on prediction‑market platforms overseen by the Commodity Futures Trading Commission (CFTC). The move adds to a broader congressional effort to tighten federal oversight of speculative contracts that resemble gambling.
Legislative background
The forthcoming measure follows earlier initiatives targeting other high‑risk prediction‑market products. In March, Senator Schiff introduced the DEATH BETS Act, a bill aimed at eliminating CFTC‑regulated contracts tied to war, terrorism, assassinations, and individual death. The new legislation seeks to extend that restriction to sports‑related wagers, which regulators and lawmakers argue fall outside the appropriate scope of federal commodities regulation.
Senator Curtis, a co‑sponsor, warned that the proliferation of sports‑betting contracts on national platforms is exposing young users—particularly in his home state of Utah—to addictive gambling practices that, he contends, should be governed by state authorities rather than the CFTC.
Why sports contracts matter to the market
Data from analytics platform Dune shows that sports‑related contracts dominate trading activity on two of the most active prediction‑market exchanges:
| Platform | Share of weekly notional volume from sports contracts | Weekly notional volume (USD) |
|---|---|---|
| Polymarket | ~48 % | $1.2 billion |
| Kalshi | ~79 % | $2.6 billion |
Together, these contracts account for the bulk of the $3.8 billion in weekly notional trading across both venues, underscoring the financial significance of sports betting in the nascent market.
Federal‑state jurisdiction battle
Regulatory pressure is mounting on multiple fronts. The CFTC recently released a staff advisory labeling event‑based contracts on prediction markets as a “financial asset class,” and it has issued an Advanced Notice of Proposed Rulemaking to solicit public input on how the Commodity Exchange Act should apply to these products. Both Polymarket and Kalshi operate as Designated Contract Markets under the CFTC’s oversight.
However, state courts have begun pushing back. An Ohio decision in early March found that the CFTC could not automatically preempt Ohio’s gambling statutes, casting doubt on whether the federal agency has exclusive jurisdiction over sports‑betting contracts. Likewise, a Nevada judge temporarily barred Kalshi from offering sports, election, and entertainment contracts in the state, citing likely violations of local gambling law.
These rulings highlight a growing tension between federal regulators, who view prediction markets as financial instruments, and state gambling authorities, which treat many of the same contracts as wagering activities.
Potential impact on crypto‑related prediction markets
If enacted, the bill would force platforms that currently list sports contracts to either cease that portion of their business or seek licensing at the state level, where gambling regulations differ widely. The shift could:
- Reduce trading volume: Given the dominance of sports contracts, platforms may see a sharp decline in overall notional activity.
- Prompt migration: Users might move to jurisdictions with more permissive gambling frameworks or to offshore platforms less subject to U.S. regulation.
- Increase compliance costs: Exchanges would need to navigate a patchwork of state licensing regimes, potentially raising barriers to entry for smaller operators.
- Catalyze market segmentation: A clear division could emerge between “financial‑style” prediction contracts (e.g., political or macro‑economic events) and “gambling‑style” contracts (sports and entertainment), each subject to different regulatory regimes.
Key takeaways
- Bipartisan effort: Senators Schiff and Curtis are spearheading a bill that would ban sports‑betting and casino‑style contracts on CFTC‑regulated prediction markets.
- Significant market share: Sports contracts account for nearly half of Polymarket’s and almost 80 % of Kalshi’s weekly notional volume, representing a major revenue stream for these platforms.
- Regulatory friction: Recent CFTC guidance and state court rulings underscore an ongoing clash between federal classification of prediction markets as financial assets and state gambling laws.
- Potential industry reshaping: The legislation could compel prediction‑market platforms to overhaul their product offerings, seek state licenses, or retreat from the U.S. market altogether.
The bill’s fate in the Senate will be closely watched by both the financial‑services community and the broader cryptocurrency ecosystem, as it may set a precedent for how emerging speculative products are regulated in the United States.
Source: https://cointelegraph.com/news/senators-bill-sports-betting-ban-prediction-markets?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
