US Senators Seek to Bar Prediction Markets From Offering Sports Betting and Casino-Style Contracts

Prediction markets let traders buy event contracts tied to real-world outcomes and argue the products are federally regulated derivatives rather than gambling. The Commodity Futures Trading Commission oversees such markets in the US. Wildfire contracts are especially sensitive because, unlike hurricanes or earthquakes, their outcomes can be directly altered by human action. Critics say the wagers could reward arson, give firefighters or officials with nonpublic information an edge, and allow traders to profit from devastated communities.

On Aug. 4, nine Democratic US senators asked CFTC Chairman Michael Selig to prohibit wildfire event contracts on domestic designated contract markets and address similar trading on offshore platforms. The lawmakers cited more than $1.2 million wagered on Polymarket during the Palisades and Eaton fires in January 2025. Those Southern California blazes killed 31 people and destroyed more than 16,000 structures. They asked the agency to say whether such contracts serve the public interest and to outline any planned guidance or enforcement by Aug. 14.

Prediction markets let users trade event contracts tied to sports, elections, weather and other outcomes. The core legal dispute is whether those products are gambling subject to state control or derivatives governed by the federal Commodity Exchange Act. Minnesota became the first U.S. state to enact an outright ban, escalating a nationwide jurisdictional fight between state gaming authorities and the Commodity Futures Trading Commission, which says it has exclusive oversight of swaps listed by federally regulated exchanges including Kalshi and Polymarket US.

U.S. District Judge Katherine Menendez on July 27 issued a preliminary injunction blocking Minnesota’s law days before its Aug. 1 effective date. The measure would make operating or assisting a prediction market a felony. Menendez said the CFTC, Kalshi and Polymarket were likely to succeed in showing that the Commodity Exchange Act preempts the statute for many event contracts, while enforcement would cause irreparable harm. The order remains in place until a final ruling on the merits, giving the platforms and federal regulator an interim victory.

Prediction markets such as Kalshi and Polymarket allow users to trade event contracts tied to election and policy outcomes. Because members of Congress have access to nonpublic government information, placing such wagers could create conflicts of interest and raise insider-trading concerns. Congress is therefore seeking to extend existing financial-trading ethics rules to the rapidly growing prediction-market industry.

On June 18, 2026, Wisconsin Republican Representative Bryan Steil, chairman of the House Administration Committee, introduced the Stop Lawmakers from Predicting Act. It would bar members of Congress, their spouses and dependent children from trading event contracts involving government policies, actions and political outcomes. Violators would have to pay the greater of $2,000 or 10% of the transaction value, plus their net profit. The bill does not cover White House officials.

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 wager on political, military and sporting outcomes through event contracts. Such products are regulated by the U.S. Commodity Futures Trading Commission, but have raised fairness concerns because people with access to confidential information could profit from them. In January 2026, a trader made more than $409,000 by betting on political developments in Venezuela.

On March 23, 2026, Kalshi barred candidates from betting on their own elections and prohibited sports insiders from trading related contracts. Polymarket also banned people with confidential information or the ability to influence outcomes from placing bets. On May 22, the U.S. House Committee on Oversight and Government Reform launched an investigation, saying more than 80 Polymarket users were linked to suspicious trades, and ordered both platforms to provide KYC and monitoring data by June 5.

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 allow traders to wager on the outcomes of events such as elections, wars and policy decisions. Because senators and staff may have access to nonpublic government information, such bets raise concerns about conflicts of interest and insider profiteering. A week before the vote, an active-duty member of the US military was accused of using classified information to bet on the arrest of former Venezuelan President Maduro, earning more than $400,000 and highlighting the ethical risks for public officials.

On April 30, 2026, the US Senate unanimously approved S. Res. 708, introduced by Republican Senator Bernie Moreno, amending Standing Rule 37 with immediate effect. An amendment by Democratic Senator Alex Padilla extended the ban to all senators, officers and employees. The resolution also urged the House of Representatives and the executive and judicial branches to adopt similar restrictions.

Prediction markets such as Polymarket and Kalshi allow users to wager on political and military outcomes through event contracts. Participation by officials with access to classified information could enable insider profits and even distort wartime decisions. The controversy arose after an account wagered on Nicolás Maduro’s removal before a U.S. military raid in Venezuela in January and made more than $400,000.

On March 17, 2026, Democratic Representative Greg Casar and Senator Chris Murphy introduced the BETS OFF Act, which would prohibit officials from using nonpublic information to bet on sensitive government actions. On March 29, more than 40 Democratic lawmakers also wrote to the Commodity Futures Trading Commission and the Office of Government Ethics, seeking executive-branch guidance and an investigation into nearly $1 million in suspicious profits made before the Iran attack.

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.