A bipartisan Senate bill introduced in March 2026 aims to ban sports betting and casino-style contracts on federally regulated prediction markets, marking a significant escalation in Washington’s scrutiny of these financial platforms. According to a Wall Street Journal report, Senators Adam Schiff (D-CA) and John Curtis (R-UT) are spearheading legislation that would explicitly prohibit such contracts on markets overseen by the Commodity Futures Trading Commission (CFTC). This move directly challenges the growing trading volume on platforms like Polymarket and Kalshi, where sports-related contracts dominate activity. The regulatory push reflects deepening concerns about consumer protection and jurisdictional boundaries between state and federal authorities.
Senate Bill Targets Prediction Market Contracts
The proposed legislation seeks to amend the regulatory framework governing prediction markets. Specifically, it would bar the CFTC from allowing contracts tied to sports outcomes or casino-style gaming on designated contract markets. Senator Curtis emphasized the consumer protection rationale behind the bill in statements to the Wall Street Journal. He expressed particular concern about young people in states without legal gambling, like Utah, accessing these products through federally regulated platforms. Meanwhile, Senator Schiff previously introduced related legislation, the DEATH BETS Act in March 2026, which aimed to prohibit prediction market contracts linked to war, terrorism, or assassination.
This legislative effort occurs within a broader context of regulatory reevaluation. The CFTC itself issued a staff advisory on March 12, 2026, classifying event contracts as a distinct “financial asset class.” Subsequently, the agency requested public feedback on how the Commodity Exchange Act applies to prediction markets. These parallel developments indicate a concerted Washington effort to define the legal perimeter for this emerging financial sector. The Senate bill represents a more restrictive approach, seeking to carve out specific contract types from CFTC oversight.
Sports Betting Drives Prediction Market Volume
Data reveals why sports contracts are a primary regulatory target. Sports-related contracts generate the majority of trading volume on leading prediction market platforms. For instance, analytics from Dune indicate these contracts accounted for 47.7% of Polymarket’s weekly notional volume and a striking 78.8% for Kalshi in a recent week. In dollar terms, sports betting generated approximately $1.2 billion in weekly notional volume for Polymarket and $2.6 billion for Kalshi. This substantial economic activity underscores the high stakes of the regulatory debate.
The popularity of sports contracts presents a clear challenge for regulators. Prediction markets argue they offer financial products for hedging or speculating on event outcomes, not traditional gambling. However, the line becomes blurred with sports betting, which many states regulate separately under gambling statutes. The core legal question revolves around whether a contract predicting a sports score constitutes a prohibited “gaming” contract or a legitimate financial derivative. The Senate bill attempts to resolve this ambiguity through an outright ban, prioritizing state control over gambling laws.
Jurisdictional Conflict Between State and Federal Authority
The regulatory landscape is further complicated by ongoing jurisdictional disputes. CFTC Chair Michael Selig has asserted the agency’s “exclusive jurisdiction” over prediction markets as designated contract markets. However, state courts have begun testing this claim. An Ohio judge ruled on March 9, 2026, that Kalshi failed to demonstrate the Commodity Exchange Act necessarily preempts Ohio’s sports gambling laws. The judge questioned whether sports betting contracts fall under the CFTC’s exclusive jurisdiction.
Similarly, a Nevada judge issued a temporary restraining order on March 22, 2026, blocking Kalshi from offering sports, election, and entertainment contracts in the state for 14 days. The court found state regulators were reasonably likely to succeed in arguing these markets violated Nevada gambling law. These legal challenges highlight the tension between federal financial regulation and state gambling prohibitions. The Senate bill could potentially clarify this conflict by explicitly removing sports contracts from the CFTC’s purview, thereby relegating them to state control.
Regulatory Scrutiny Intensifies Across Platforms
Increased regulatory attention follows a period of rapid growth for prediction markets. Platforms like Polymarket and Kalshi, regulated by the CFTC as Designated Contract Markets (DCMs), have expanded their contract offerings beyond politics to include sports, entertainment, and current events. This expansion triggered scrutiny from multiple regulatory bodies. The CFTC’s Advanced Notice of Proposed Rulemaking in March 2026 formally initiated a process to gather public input on applying existing commodities law to these markets.
Simultaneously, lawmakers express concerns about market integrity. Some legislators point to potential insider trading risks, especially for contracts tied to geopolitical events like conflicts. The renewed focus stems partly from trading activity surrounding international events in early 2026. While prediction markets promote price discovery and information aggregation, critics argue they could incentivize harmful behavior or create unregulated gambling avenues. The bipartisan nature of the Senate bill suggests these concerns cross party lines, increasing the likelihood of serious legislative consideration.
Potential Impact on Market Structure and Innovation
The proposed ban carries significant implications for market structure. If enacted, prediction market platforms would lose their most popular product category. This could drastically reduce trading volume and liquidity, potentially threatening the business models of CFTC-regulated platforms. Market operators might need to pivot toward other event types, such as economic indicators or corporate outcomes, which historically attract less retail interest. Alternatively, platforms could seek different regulatory statuses, though options remain limited.
Furthermore, the legislation could stifle financial innovation in event contracts. Proponents of prediction markets argue they provide valuable hedging tools and improve information efficiency. For example, a business might use a weather outcome contract to hedge against bad weather impacting sales. By restricting contract types, the bill could limit these potential use cases. The debate ultimately balances innovation against consumer protection and regulatory clarity. The outcome will shape whether prediction markets evolve as niche financial instruments or mainstream trading venues.
Conclusion
The bipartisan Senate bill targeting sports betting on prediction markets represents a pivotal moment for this emerging financial sector. Driven by concerns over consumer protection and jurisdictional clarity, the legislation seeks to draw a bright line between financial derivatives and gambling contracts. Its progression will directly impact platforms like Polymarket and Kalshi, where sports betting dominates trading volume, and could redefine the boundary between state and federal regulatory authority. As courts already challenge the CFTC’s exclusive jurisdiction, this legislative effort may determine whether prediction markets can legally offer sports-related contracts or must exclude them to operate within the United States.
FAQs
Q1: What does the Senate bill propose regarding prediction markets?
The bipartisan bill, led by Senators Schiff and Curtis, proposes to ban sports betting and casino-style contracts on prediction markets regulated by the Commodity Futures Trading Commission (CFTC). It aims to prevent these contracts from being listed on designated contract markets.
Q2: Why are sports contracts specifically targeted?
Sports contracts constitute the largest share of trading volume on major prediction market platforms like Polymarket and Kalshi, making them economically significant. Legislators also view them as closely resembling traditional sports gambling, which falls under state regulatory authority.
Q3: How have state courts reacted to CFTC-regulated prediction markets?
State courts in Ohio and Nevada have recently issued rulings challenging the CFTC’s claim of exclusive jurisdiction. These courts have allowed state gambling laws to be applied to prediction market contracts, creating legal uncertainty.
Q4: What is the DEATH BETS Act?
Introduced by Senator Schiff in March 2026, the DEATH BETS Act is separate legislation that seeks to prohibit prediction markets from listing contracts tied to war, terrorism, assassination, or individual death. It reflects broader concerns about contracts on sensitive geopolitical events.
Q5: What is the current regulatory status of platforms like Polymarket and Kalshi?
Polymarket and Kalshi are currently regulated by the CFTC as Designated Contract Markets (DCMs). This status allows them to offer event contracts, but they must comply with CFTC rules. The new bill and state court actions are testing the limits of this regulatory framework.
Updated insights and analysis added for better clarity.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
