Senate Crypto Bill Faces New Fight Over Prediction Markets

TLDR

• U.S. gaming industry groups urged the Senate to ban sports prediction markets through crypto market structure legislation.
• The groups argued that prediction platforms have expanded gambling without voter approval or legislative authorization.
• Industry associations said sports event contracts bypass state and tribal gambling regulations.
• The letter claimed prediction markets present gambling products as financial investments with limited safeguards.
• Gaming groups argued the CFTC lacks the authority and infrastructure to regulate nationwide sports betting.

U.S. gaming industry groups have urged senators to block sports-related prediction markets through upcoming crypto market structure legislation, according to a report published Tuesday. The groups argue that prediction platforms have expanded gambling activity without voter approval and have bypassed state and tribal oversight. Their request comes as lawmakers continue reviewing the Senate’s crypto market structure bill before a full chamber vote.

Gaming Organizations Seek Restrictions Through Crypto Bill

The American Gaming Association, the Indian Gaming Association, and the Association of Gaming Equipment Manufacturers sent a letter to the Senate. The groups asked lawmakers to include language that would prohibit sports and casino-style event contracts.

They argued that prediction platforms have created a broad gambling market outside traditional state systems. They also said these products operate without the approvals required for sports wagering.

The letter stated that platforms market sports contracts as financial products rather than gambling offerings. As a result, the groups said operators avoid state and tribal regulations.

The organizations wrote that prediction platforms have “fueled the largest expansion of gambling” in U.S. history. They said the growth occurred without legislative authorization or direct voter approval.

The groups also claimed that these platforms weaken local oversight frameworks. They added that regulated gambling systems support jobs, tax collections, and community programs.

According to the letter, some platforms present wagering products as investment opportunities. The organizations said that the approach may expose younger users to gambling activity.

They also argued that responsible gaming protections remain insufficient on certain platforms. Therefore, they urged lawmakers to address the issue through federal legislation.

Prediction Markets Face Regulatory and Political Pressure

The letter focused on the Commodity Futures Trading Commission’s role in overseeing event contracts. The groups argued that the agency was not created to regulate sports wagering.

They stated that the CFTC lacks the expertise and infrastructure required for nationwide betting oversight. Consequently, they asked Congress to clarify the agency’s authority.

The organizations wrote that “sports betting falls outside the CFTC’s remit.” They added that prediction markets should not offer sports contracts through federally regulated platforms.

The Clarity Act remains the Senate’s primary crypto market structure proposal. Lawmakers advanced the bill through the Senate Banking Committee last month.

The measure now awaits consideration by the full Senate. Meanwhile, The Block reported that it sought additional comment from the American Gaming Association.

States and Federal Regulators Continue Jurisdiction Dispute

Prediction markets gained wider attention during the 2024 U.S. election cycle. Since then, participation has remained active ahead of the upcoming midterm elections.

However, lawmakers and regulators have increased scrutiny of the sector. In March, Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act.

The bill seeks to prohibit sports and casino-related event contracts on registered platforms. At the same time, several states launched enforcement actions against Kalshi and Polymarket.

State regulators accused the platforms of violating local gambling laws. Meanwhile, the CFTC has defended its authority over sports-related contracts.

The agency filed lawsuits against Wisconsin, Illinois, Arizona, Connecticut, New York, and New Mexico. Last week, it also proposed rules supporting sports-related contracts while restricting markets tied to terrorism, assassinations, and war.

Kalshi and Polymarket remain the sector’s largest operators. Kalshi recorded $16.81 billion in May volume, while Polymarket posted $7.08 billion during the same month.

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