Rare Bipartisan Alliance: U.S. Moves to Ban Sports Betting Prediction Markets

Author: ChandlerZ, Foresight News

On March 23, California Democratic Senator Adam Schiff and Utah Republican Senator John Curtis jointly introduced legislation to ban platforms regulated by the U.S. Commodity Futures Trading Commission (CFTC) from offering sports and casino-style betting contracts. This is the Senate’s first bipartisan proposal targeting prediction market regulation, directly targeting the U.S. operations of Kalshi and Polymarket.

On March 20, the U.S. Federal Appeals Court approved a temporary restraining order against Kalshi in Nevada, preventing it from offering sports contracts. Lawyer Daniel Wallach stated that before the preliminary injunction hearing, the company cannot operate in Nevada for at least 14 days. “Under Nevada law, temporary restraining orders are not appealable, so Kalshi will be forced to exit the state during this period.” A few days earlier, Arizona had filed criminal charges against Kalshi’s parent company, accusing it of operating unlicensed gambling activities.

Over the past three months, four federal bills targeting prediction markets have been introduced in the U.S. Congress. Arizona’s Attorney General has filed 20 criminal charges against Kalshi. Massachusetts courts have ruled its sports contracts violate state law. Enforcement actions in Nevada, Tennessee, and other states, along with federal responses, are shaping a multi-layered regulatory battle.

What the bills aim to ban, and what lawmakers say

The Schiff-Curtis bill bans two types of contracts: sports-related contracts (professional leagues and college events) and casino-style games (slot machines, video poker, blackjack, bingo, etc.). Currently, Kalshi and Polymarket’s trading volumes are heavily concentrated on professional and college sports, where both platforms directly compete with traditional betting giants like FanDuel and DraftKings. On Super Bowl day alone, Kalshi processed $871 million in sports-related contracts, with the NFL market surpassing $1 billion in total volume. This scale has made several state governments realize that the stakes are substantial.

The two lawmakers emphasize different concerns. Schiff points to regulatory arbitrage, claiming the CFTC is enabling and even promoting these markets. He argues Congress should step in to close this illegal backdoor. He states that this model violates consumer protection laws, infringes on tribal sovereignty, and does not generate revenue for public coffers. Curtis focuses on addiction risks, noting that many young people in Utah are exposed to sports betting and casino-like contracts that can be addictive. Such activities should be regulated by states, not federal agencies.

Schiff’s mention of “tribal sovereignty” is noteworthy. Native American tribes hold legal gambling licenses in multiple states, forming a key part of the current state-level gambling regulatory framework, and are among the most directly affected stakeholders by prediction markets. This adds an extra layer of political support beyond party lines.

Federal and state jurisdictions, fighting over the same contracts

The emergence of these bills stems from an unresolved jurisdiction dispute. The CFTC claims federal exclusive jurisdiction, having submitted a brief to the Ninth Circuit Court of Appeals in February, asserting its authority over commodity derivatives markets and that states have no right to intervene. Kalshi has filed lawsuits against Arizona, Iowa, Utah, and others, attempting to block state enforcement. Polymarket sued Michigan in early March for similar reasons.

In response, states have bypassed the dispute and taken direct action. Massachusetts, Michigan, Nevada, and Arizona have all moved to regulate these contracts as gambling products subject to state oversight. The federal court in Tennessee sided with Kalshi, ruling its sports contracts are federally regulated swap products; Massachusetts courts, however, found CFTC’s exclusive jurisdiction claim too broad. The same contracts have received opposite rulings from different courts, which is why legislation seems to be the only viable solution.

Sports contracts are at a disadvantage in this dispute. The CFTC’s basis for including prediction markets within event contracts is that these contracts serve economic functions like risk hedging and price discovery. Contracts on election outcomes or policy directions can be justified, but sports win/loss contracts lack clear commercial hedging needs and blur the line with traditional gambling.

MLB, embroiled in a betting scandal, partners with Polymarket

A notable detail in this regulatory battle is that Major League Baseball (MLB), currently facing its worst betting scandal in decades, has signed an authorization agreement with Polymarket, allowing it to serve as the league’s official prediction market platform. The agreement grants Polymarket exclusive rights to use MLB data and branding, and includes provisions for joint oversight of baseball-related bets on the platform.

The league’s logic is that, since betting on games cannot be fully prevented, bringing it into the open is better than letting it operate in a gray area. This approach is the opposite of Schiff’s legislative path, which aims to remove sports contracts from CFTC regulation altogether, instead choosing to regulate prediction markets through league-authorized agreements.

The risks lawmakers worry about have already appeared on Polymarket. Hours before a U.S. military strike on Iran, the platform saw large anonymous bets, with users accurately predicting the event’s outcome and cashing out hundreds of thousands of dollars. For most participants without informational advantages, sports prediction markets resemble traditional gambling—public information is already priced in, and illiquid markets are common. For those with early information, liquid platforms become nearly perfect arbitrage tools, raising concerns about potential manipulation of events—precisely what lawmakers fear most.

The key upcoming events are the Nevada 14-day hearing, which will decide whether the temporary restraining order becomes a permanent ban; and the Arizona criminal case, where Kalshi has requested the attorney general to dismiss the charges. The outcome remains uncertain.

How far the Schiff-Curtis bill can go in the Republican-controlled Senate is still an open question. Some lawmakers have noted that support may be limited because former President Trump previously profited from prediction markets, which could influence Republican backing on this issue.