In 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), the 1992 federal law that had banned commercial sports betting in most states. The ruling — Murphy v. National Collegiate Athletic Association — held that PASPA violated the anti-commandeering doctrine of the Tenth Amendment by essentially forcing states to maintain federal policy. The decision returned sports betting regulation to the states.
Thirty-eight states now have legal sports betting. The American Gaming Association estimated the US sports betting market at approximately $119 billion in 2023. A significant, regulated, taxed industry has grown in just six years.
And then came prediction markets — which sidestep the whole state-by-state framework by operating as federally regulated futures exchanges.
What Prediction Markets Are and Why the Regulatory Distinction Matters
Prediction markets like Kalshi and Polymarket allow users to buy and sell contracts whose value is determined by the outcome of future events. A contract might pay $1 if the Kansas City Chiefs win the Super Bowl, or $0 if they don't. The market price of that contract at any given time reflects participants' collective probability estimate of the outcome — a $0.62 contract implies 62% probability.
This structure looks, from the outside, essentially identical to sports betting: you put money on an outcome, you win or lose based on what happens. The legal distinction is significant: sports betting platforms are licensed under state gambling laws. Prediction markets are registered with the Commodity Futures Trading Commission (CFTC) as designated contract markets (DCMs) — the same regulatory category as the Chicago Mercantile Exchange.
The CFTC regulates futures and derivatives markets. Its legal framework was designed for things like corn futures, crude oil contracts, and interest rate swaps — instruments used by producers, consumers, and financial institutions to hedge risk. The CFTC does not have a minimum age requirement of 21 like state gambling laws. It does not require the revenue-sharing arrangements with state governments that licensed sports books provide. It does not restrict platforms to geographic boundaries in the way state licenses do.
Kalshi and Polymarket have argued, successfully so far at the federal level, that their event contracts are legitimate derivatives products — that people who bet on whether the Chiefs will win the Super Bowl are expressing a view on a future uncertain outcome in a regulated marketplace, which is precisely what futures markets do. Under the Trump administration, the CFTC has taken the position that it has "exclusive regulatory control" over these companies, preempting state gambling laws.
The Senate Bill: What It Would Do
The bill introduced by Senator Schiff (D-CA) and Senator Curtis (R-UT) Monday would ban CFTC-regulated platforms from offering:
- Contracts whose value is determined by the outcome of sporting events (sports betting)
- Casino-style games including virtual poker, slot machines, and blackjack
Senator Schiff's statement cuts to the core argument: "Sports prediction contracts are sports bets — just with a different name. It's time for Congress to step in and eliminate this backdoor which violates state consumer protections, intrudes upon tribal sovereignty and offers no public revenue."
Senator Curtis, the Republican co-sponsor, framed it as a jurisdictional issue: "addictive sports betting and casino-style gaming contracts" belong "under state control, not under federal regulators."
The tribal sovereignty reference in Schiff's statement is significant. Native American tribes negotiated compacts with states for exclusive or privileged rights to offer gambling in exchange for revenue-sharing and other agreements. Those compacts typically do not cover online platforms regulated at the federal level. Prediction markets offering the functional equivalent of casino games on a nationally available app undercut tribal gaming revenues that were established through lengthy government-to-government negotiations.
The Nevada Action: Courts Moving Faster Than Congress
On Friday, a Nevada judge temporarily banned most of Kalshi's operations in the state after Nevada filed a lawsuit against the company. The ban lasts two weeks pending further proceedings.
Nevada's case is the strongest test of the state-versus-federal jurisdictional question. Nevada has the most established and sophisticated gambling regulatory regime in the country — its Gaming Control Board is the model for state sports betting regulation nationally. If Nevada cannot enforce its gambling laws against a CFTC-licensed prediction market, the preemption argument is essentially settled in Kalshi's favor for all states.
If the Nevada court finds that state gambling law applies notwithstanding CFTC registration, it creates a circuit conflict that will eventually require either Supreme Court resolution or congressional action — precisely the kind of pressure that tends to move federal legislation that has otherwise stalled.
The Scale: How Big Have These Markets Actually Gotten?
Prediction markets have grown from niche to mainstream remarkably quickly. Key data points:
- Polymarket reported approximately $8 billion in total trading volume in 2024, much of it on the US presidential election. It is primarily used by international users, as US residents face restrictions under existing CFTC rules — though enforcement has been limited.
- Kalshi, which is the primary CFTC-registered platform targeting US users, reported hundreds of millions of dollars in weekly trading volume by early 2026.
- The 2026 Super Bowl saw significant volumes on prediction markets, with Kalshi reporting it as among their highest-volume events to date.
- March Madness is currently underway — the NCAA tournament is one of the highest-volume sports betting events in the US market — and prediction markets are competing directly with licensed sportsbooks for that volume.
The established gambling industry — DraftKings, FanDuel, BetMGM — has lobbied aggressively against prediction markets. They argue that they pay state licensing fees, state taxes, comply with age verification and responsible gambling mandates, and fund problem gambling programs; prediction markets do none of these things, yet offer a functionally identical product. Kalshi's response — that the bill is "motivated by casino interests that are threatened by competition" — reflects this competitive dynamic accurately. The incumbents have a financial interest in restricting new entrants. They also have a legal argument about regulatory equity.
What Prediction Markets Actually Do Beyond Sports
The legislative debate focuses on sports betting because that's the most politically legible comparison — everyone understands what sports gambling is. But the more consequential question about prediction markets isn't whether you can bet on the Super Bowl. It's whether you can bet on political elections, military conflicts, and policy outcomes.
Polymarket has allowed trading on:
- Who wins presidential elections (generated significant controversy in 2024 when a single large trader appeared to influence market prices and media coverage)
- Whether the US would enter a recession in a given year
- Whether specific military actions would occur (including contracts on the Iran war)
- Whether specific legislation would pass Congress
- Whether specific people would be indicted or arrested
Kalshi has offered contracts on whether the US government would shut down, whether the Fed would cut rates at specific meetings, and similar policy/financial outcomes. The CFTC originally approved election contracts on Kalshi in 2024 after lengthy deliberation.
The information aggregation function of prediction markets is genuinely valuable in ways that sports betting is not — prices on policy outcomes can reveal collective probability estimates that are useful for decision-makers. Academic research going back to the Iowa Electronic Markets (started in 1988) has consistently found prediction markets to be accurate forecasters of election outcomes, often outperforming polls.
But markets on military conflicts and criminal proceedings raise different issues: there are potential incentives for market participants to take actions that move the outcome in their favor, creating what economists call "moral hazard." A large enough trader who holds a position that pays if a ceasefire occurs has a financial incentive to work toward a ceasefire — which sounds benign. The same logic applies to less benign scenarios.
The Legal History: How Did We Get Here?
The CFTC has had a complicated relationship with event contracts since the early 2000s. In 2012, it rejected a proposal by Nadex (North American Derivatives Exchange) to offer political event contracts, concluding they were contrary to the public interest under the Commodity Exchange Act. That ruling established that the CFTC had the authority to block event contracts it deemed contrary to public interest — but also that it had discretion in how it exercised that authority.
Under the Biden administration, the CFTC was skeptical of prediction markets' expansion. Under the Trump administration's CFTC — led by Chairman Brian Quintenz and his successor — the agency has been significantly more permissive, allowing election contracts and declining to block sports event contracts that states have challenged.
The Schiff-Curtis bill would remove that discretion from the CFTC entirely, writing the prohibition on sports and casino-style contracts into statute. This is the bluntest available tool — it would not require the CFTC to reach a public interest conclusion; it would simply prohibit the contracts by law.
What Happens Next
Bipartisan bills introduced in the Senate are not the same as laws. Most bills die in committee. The Schiff-Curtis bill faces headwinds: the Trump administration has been broadly supportive of prediction markets as innovative financial products, and a Republican-controlled Senate may be reluctant to limit a technology that the administration views positively.
The Nevada court action is the more immediate pressure point. If state courts establish that CFTC registration does not preempt state gambling law, prediction markets face a patchwork of state-by-state prohibitions that would functionally limit their sports betting operations regardless of federal legislation. A Supreme Court case on the preemption question, if it emerges from the Nevada or other state actions, would be the definitive resolution — in either direction.
Whether prediction markets are innovative financial instruments or sports books with better lawyers depends on which agency is doing the regulating. Congress is now trying to decide which one gets to answer that question.