U.S. Senate Hearing Scrutinizes Prediction Market Platforms Crypto.com and Kalshi

Prediction markets let users trade event contracts tied to outcomes ranging from elections to game winners, point spreads and player statistics. Kalshi and Polymarket maintain that their US exchanges fall under the Commodity Futures Trading Commission and that the Commodity Exchange Act preempts state gambling rules. State and local authorities counter that sports contracts are functionally wagers offered without the licensing, taxes, age limits and responsible-gambling safeguards imposed on regulated sportsbooks.

Baltimore’s city government filed suit in Baltimore City Circuit Court on Aug. 13, 2026, naming Kalshi, Polymarket and distribution partners Robinhood, Webull and Coinbase as defendants. The complaint alleges the companies operated unlicensed sports-betting services and deceptively presented wagering products as federally regulated financial trading. Baltimore is seeking an injunction, restitution and disgorgement, plus civil penalties of as much as $1,000 for each violation and each day it continues. The filing did not specify an aggregate damages demand.

Kalshi and Polymarket offer sports predictions through event contracts regulated by the US Commodity Futures Trading Commission, creating a regulatory disparity with traditional gaming operators that must obtain licenses and pay taxes in each state. Sports have become a core growth driver for the platforms, meaning their potential inclusion in the CLARITY Act could affect federal, state and tribal jurisdiction as well as a major source of platform revenue.

On June 16, 2026, more than 60 groups, including the American Gaming Association, the Indian Gaming Association and the Association of Gaming Equipment Manufacturers, sent a letter to the Senate seeking an explicit ban on sports and casino-style contracts. Kalshi recorded $16.81 billion in trading volume in May, compared with $7.08 billion for Polymarket. The bill’s next step is a vote by the full Senate.

Kalshi and Polymarket allow users to trade contracts tied to game outcomes, point spreads and player statistics. The dispute centers on whether these products are derivatives subject exclusively to oversight by the U.S. Commodity Futures Trading Commission, or must also comply with state gambling laws. Kentucky separately enacted legislation in April 2026 imposing a 14.25% tax on platform trading fees, above the 9.75% rate on racetrack wagers.

On June 17, 2026, Kentucky Attorney General Russell Coleman sued Kalshi, Polymarket and their partners Coinbase, Robinhood and Webull in Franklin Circuit Court, alleging that they offered sports betting without licenses and failed to provide support for problem gambling. The state described the two platforms as multibillion-dollar businesses. The case puts the Trump administration, which supports exclusive federal oversight, in direct conflict with a Republican-led state government.

Prediction markets allow users to trade contracts tied to the outcomes of real-world events. After Kalshi and Polymarket began offering sports-event contracts in 2025, the industry grew into a billion-dollar market within a year. At the heart of the controversy is that platforms have told courts and regulators their products can be used for investment and hedging while marketing them to consumers as legal betting. The dispute raises questions over the respective authority of the CFTC and local gambling regulators, as well as consumer protection.

On June 3, 2026, nine Democratic members of the US House of Representatives, including Kevin Mullin and Gabe Vasquez, sent a letter asking the Federal Trade Commission (FTC) to investigate misleading advertising and consumer complaints and consider possible enforcement action. They requested a response by June 29. The letter cited a March poll in which 61% of respondents said event contracts were more akin to gambling, while 81% considered wagering on sports prediction markets to be gambling.

U.S. prediction market platform Kalshi allows users to trade contracts on political, economic and public-event outcomes, but its business has long faced jurisdictional disputes between state gambling laws and federal commodities regulation. The new organization, Americans for Fair Markets, seeks to break the traditional gambling industry's policy advantage, with the outcome shaping whether prediction markets can legally expand across the United States.

Kalshi recently announced its support for Americans for Fair Markets, which was co-founded with the involvement of a former Trump administration official. The group will work with an industry coalition backed by Coinbase and Crypto.com as the U.S. government scrutinizes the regulation of prediction market platforms. Available information does not disclose the organization's exact founding date, the amount committed or the official's name.

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.