US Gaming Industry Presses Senate to Ban Sports Prediction Markets in Crypto Bill

Polymarket allows traders to use crypto assets to bet on political and military events, but publicly visible on-chain positions could also serve as intelligence signals. Bubblemaps suspects that some traders had access to nonpublic information before a U.S. military operation. If hostile nations used such activity to assess the timing of operations, the consequences could extend beyond insider trading and endanger military personnel and civilians.

Bubblemaps said on May 18, 2026, that nine accounts placed bets before the U.S. strike on Iran on February 28, recording a 98% win rate across 80 trades and earning more than $2.4 million. Trading volume in military-related contracts has exceeded $1 billion this year. Mike Levin and Adam Schiff subsequently introduced the DEATH BETS Act to ban war contracts, while Polymarket said it had deployed AI and blockchain forensics for monitoring.

Legal sports betting expanded rapidly after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act in 2018. The market is now worth about $165 billion and spans 39 states and Washington, D.C. Kalshi, Crypto.com and others have entered the sector with event contracts regulated by the Commodity Futures Trading Commission, creating jurisdictional conflicts with state gambling laws and tribal gaming interests.

The U.S. Senate Commerce Committee's consumer protection panel held a roughly two-hour hearing on May 20, 2026, focusing on advertising, addiction and the risk of game manipulation. Chairman Ted Cruz cited NBA and MLB manipulation cases and said the Supreme Court might have to decide the issue. Kalshi had previously pledged $2 million to the National Council on Problem Gambling, while testimony indicated that nearly 50% of its trading during the 2025–26 season came from sports contracts.

Prediction markets such as Kalshi and Polymarket allow users to trade on sports outcomes through CFTC-regulated “event contracts,” potentially bypassing state gambling licenses, age restrictions and consumer-protection rules. Sports have become a major source of trading activity for the platforms. The clash between federal derivatives oversight and state gambling jurisdiction is now central to whether the industry can continue expanding.

On March 23, 2026, Democratic Senator Adam Schiff and Republican Senator John Curtis introduced the Prediction Markets Are Gambling Act, which would prohibit CFTC-registered operators from listing contracts resembling sports bets or casino games. Trading volume in contracts on that month's March Madness champion exceeded $100 million, while Super Bowl-related trading volume surpassed $1 billion in 2026.

Prediction markets allow users to trade contracts on election, economic or sports outcomes. Operators including Kalshi and Polymarket argue that their products are derivatives regulated by the CFTC, while states view proposition wagers as gambling, creating a jurisdictional clash between federal commodities law and state gaming laws.

The Utah Legislature passed HB243 in 2026, classifying proposition wagers on event outcomes as illegal gambling and barring operators from offering sports-betting-like prediction services in the state. Governor Spencer Cox has said he will sign the bill, exposing Kalshi and Polymarket to the risk of being blocked and facing enforcement action.