Prediction markets face new political pressure in U.S.
Mick Mulvaney, a former congressman and former White House chief of staff under President Donald Trump, has taken the lead in a coalition opposing prediction markets. The group is pushing for tighter oversight of platforms that, in its view, effectively offer sports betting disguised as financial contracts.
The organization Gambling Is Not Investing argues that platforms such as Kalshi and Polymarket operate in states where sports betting remains illegal, thereby bypassing state and tribal gambling laws, The Hill reported.
Where the line is drawn
Mulvaney said the issue goes beyond terminology.
“Gaming products — regardless of what you call them — must comply with established state and tribal laws,” he said.
He added: “Rebranding sports betting as ‘trading,’ ‘investing,’ or ‘forecasting’ misleads consumers, undermines responsible gaming principles, and weakens state and tribal systems designed to protect the public and fund essential public services.”
Prediction markets offer contracts tied to political, economic and sporting outcomes. Supporters argue these are derivatives regulated at the federal level by the Commodity Futures Trading Commission (CFTC), not gambling activities governed by state law.
In February, CFTC Chair Mike Selig made clear the agency intends to defend its authority:
“CFTC is taking an important step to ensure these markets have a place here in America and possess the integrity, resilience and dynamism our derivatives markets deserve. To those seeking to challenge our authority in this space, let me be clear: we will see you in court.”
Several states, including Utah, are already seeking to restrict such platforms through litigation.
Legislative pressure
Democratic Sen. Chris Murphy said he plans to introduce legislation banning certain types of wagers on prediction markets after reports of accounts earning millions by correctly forecasting military events.
“This is insane that this is legal,” he said.
Industry participants have formed their own Coalition for Prediction Markets, arguing they operate under federal law and that state interventions exceed local authority.
What is at stake
Interest in prediction markets surged during the 2024 election cycle. Trading volumes on Polymarket reached billions of dollars, while Kalshi secured CFTC approval to list contracts tied to political events.
The dispute now centers on jurisdiction between states and the federal regulator. Court decisions will determine whether prediction markets are treated as part of the financial system or as gambling — a distinction that will directly affect their access to U.S. users and the future of the sector.
Read also: Fed study highlights Kalshi edge in tracking macro expectations
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