WASHINGTON (Diya TV) — The rapid growth of prediction market platforms in the United States is drawing increased attention from lawmakers, regulators, and the gambling industry, as officials consider how the sector should be classified and regulated.
Prediction markets, including platforms such as Kalshi and Polymarket, allow users to trade on the outcomes of real-world events, including elections, economic indicators, and sports. These platforms typically operate under federal derivatives frameworks, which distinguishes them from traditional sportsbooks regulated at the state level.
In recent weeks, members of Congress have introduced bipartisan legislation that would restrict certain types of contracts offered by federally regulated prediction markets, particularly those tied to sports or casino-style outcomes. Lawmakers supporting the proposals have stated that such contracts resemble gambling and should fall under existing state gaming laws.
Industry groups representing traditional gambling operators have also taken a position on the issue. The American Gaming Association and the Indian Gaming Association have formally urged Congress to prohibit sports-related event contracts on prediction market platforms. In their communications with lawmakers, these organizations argue that such contracts operate outside established regulatory systems, including state licensing, taxation, and consumer protection requirements.
State governments have taken parallel action. Multiple states have issued cease-and-desist orders or initiated legal challenges against prediction market platforms, asserting that certain offerings function as unlicensed sports betting. Policy tracking groups report that more than 20 enforcement actions or lawsuits related to prediction markets are currently underway across the United States.
A central point of disagreement is jurisdiction. The Commodity Futures Trading Commission has asserted that prediction markets fall under federal oversight as derivatives markets. Several states, however, maintain that contracts tied to sports or event outcomes should be regulated under state gambling laws. This has led to an ongoing legal and regulatory conflict between federal and state authorities.
Economic considerations are also part of the debate. State governments rely on tax revenue generated from licensed gambling operators, and some officials have expressed concern that prediction markets may operate outside those tax structures. Estimates cited by policy organizations suggest that states could be losing potential tax revenue, although comprehensive audited figures have not been publicly released.
Regulators and lawmakers have also raised concerns about market integrity. Issues under discussion include the potential for insider trading in markets tied to political or geopolitical events, as well as the absence of certain safeguards that apply to state-regulated gambling, such as age verification and geolocation requirements. In response, platforms including Kalshi and Polymarket have announced updated policies restricting participation by individuals who may have access to nonpublic information or direct influence over outcomes.
The sports industry has responded in different ways. Major League Baseball has entered into a partnership with Polymarket and is coordinating on integrity monitoring efforts, while the NCAA has urged federal regulators to prohibit prediction markets tied to college sports, citing concerns related to athlete exposure and oversight.
