Key Takeaways
- Three major US gambling industry organizations are calling on Congress to prohibit sports and casino-related prediction markets from the Clarity Act crypto legislation
- Industry groups claim prediction platforms circumvent state-level gambling regulations by marketing wagers as financial instruments
- The Senate Banking Committee has already moved the Clarity Act forward; the full Senate is expected to vote soon
- State authorities in several jurisdictions have initiated enforcement proceedings against Kalshi and Polymarket over alleged gambling law violations
- The CFTC has filed lawsuits against multiple states to maintain its regulatory authority over sports prediction platforms
A coalition comprising the American Gaming Association, the Indian Gaming Association, and the Association of Gaming Equipment Manufacturers has submitted a formal letter to Senate lawmakers requesting the exclusion of sports and casino-related prediction markets from pending cryptocurrency market structure legislation.
The correspondence contends that prediction market operators have facilitated the most significant gambling expansion in United States history—achieved without electoral approval or formal legislative endorsement.
According to these industry organizations, the platforms provide coast-to-coast sports wagering capabilities through “sports event contracts” while categorizing them as federally supervised financial instruments. This classification, they maintain, allows operators to circumvent state and tribal gambling regulations.
“By offering nationwide sports betting through so-called ‘sports event contracts’ and branding it as a federally regulated financial product, these platforms have bypassed state and tribal law, weakened consumer protections, and undercut a system built on local control,” the letter stated.
The organizations additionally expressed concern regarding youth accessibility. They contend the platforms provide insufficient responsible gaming safeguards while promoting wagering products as investment opportunities.
Legislative Pathway and Future Developments
The central legislative mechanism in question is the Clarity Act. Last month, the Senate Banking Committee approved its iteration of the legislation. A comprehensive Senate floor vote represents the subsequent procedural step.
The gambling industry coalition is requesting that Congress utilize this bill to establish definitively that sports wagering remains beyond the CFTC’s regulatory scope and cannot be facilitated through prediction market operators.
Their correspondence further maintained that the CFTC lacks the institutional design for gambling or sports wagering oversight, and possesses neither the specialized knowledge nor the operational framework necessary to supervise nationwide sports betting activities.
The CFTC has mounted a vigorous defense. The regulatory body has initiated legal proceedings against numerous states—including Wisconsin, Illinois, Arizona, Connecticut, New York, and New Mexico—to preserve its jurisdictional authority over sports prediction platforms.
Just last week, the CFTC unveiled proposed regulatory guidelines that would accommodate sports-focused prediction markets while prohibiting wagers on terrorism, political assassinations, and military conflicts.
Regulatory Scrutiny Intensifies for Kalshi and Polymarket
Kalshi and Polymarket represent the dominant operators within the prediction market sector. Numerous state authorities have already initiated enforcement measures against both entities, charging them with state gambling law violations.
This past March, US senators Adam Schiff and John Curtis presented the Prediction Markets Are Gambling Act, legislation that would prohibit prediction contracts connected to sports or casino-style gaming from listing on registered exchanges.
Kalshi documented $16.81 billion in monthly transaction volume during May, representing an increase from April’s $14.81 billion. Polymarket reported $7.08 billion in May volume, declining from April’s $9.01 billion.
The ongoing dispute over prediction market regulatory authority—whether it belongs to the CFTC or state gambling commissions—has become inextricably linked to the Clarity Act’s legislative trajectory.
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