U.S. prediction market firms face Senate scrutiny over sports betting oversight

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Prediction markets face Senate scrutiny

Highlights

U.S. Senate Commerce Committee questioned Kalshi, Crypto.com, and others for two hours on sports betting ads, regulatory gaps, and risks of game manipulation.
Kalshi committed $2 million to the National Council on Problem Gambling for trader health and safety, responding to criticism over youth-targeted advertising and market integrity.
The CFTC is contesting a new Minnesota law criminalizing prediction markets, with Chairman Selig defending federal authority amid challenges from states and the American Gaming Association.

Senate hearing examines advertising, integrity and market conduct

As first reported by CoinDesk, platforms including Kalshi and Crypto.com face two hours of critical questioning at a U.S. Senate Commerce Committee hearing over advertising practices, regulatory disputes and the cheating their products may encourage.

Committee Chair Ted Cruz says gambling-related manipulation by players, coaches and others threatens confidence in sports. He points to accusations involving NBA figures, allegations that two Major League Baseball pitchers rigged pitches for money, sanctions against Major League Soccer players for intentional yellow cards, and UFC contract terminations linked to suspected match fixing.

Other lawmakers concentrate on marketing that they say fuels problem gambling and reaches young people who are supposed to be blocked from betting. Senator John Hickenlooper accuses prediction market businesses of aggressive social media promotion that preys on younger users.

Patrick McHenry, now an adviser to the Coalition for Prediction Markets after leaving the House of Representatives, says trading is not allowed for anyone under 18 and that the average user age is 33. Harry Levant of the Public Health Advocacy Institute tells lawmakers the industry is unleashing an avalanche of unregulated advertising, while describing himself as a recovering gambling addict.

Earlier this week, Kalshi co-founder and CEO Tarek Mansour says on X that the company is committing $2 million with the National Council on Problem Gambling to support an initiative on trader health and safety. He says rising retail participation in markets requires a balance between free markets, individual responsibility, customer education and safety guardrails.

CFTC authority and tribal gaming impact draw sharper debate

The hearing also highlights the industry's effort to avoid state regulators and its competition with regulated gaming on U.S. tribal lands, where gambling revenue is a central source of financial support for reservations.

At the same time, the Commodity Futures Trading Commission is pursuing a lawsuit filed on Tuesday to block a new Minnesota law that is set to classify prediction market activity there as illegal. CFTC Chairman Mike Selig says in a statement that the Minnesota law would turn lawful operators and participants in prediction markets into felons overnight, adding the case to similar agency fights involving Arizona, Connecticut, Illinois and New York.

Selig is leading a legal campaign to defend the agency's authority over prediction markets operated on registered platforms under CFTC rules. The regulator is also pursuing a formal rulemaking process to create standards tailored to the sector, even as it operates with Selig as the commission's only current member.

McHenry argues the CFTC has the capacity to police this market just as it oversees broader commodities trading, and he says event contracts are derivatives with business models fundamentally different from traditional gambling. He compares them with long-regulated grain futures and says member companies maintain surveillance that exceeds that of casinos and sportsbooks.

That view is disputed by Bill Miller, president and CEO of the American Gaming Association, who tells senators federal regulators are not competent to manage the sector and are financially harming tribes and states. Cruz says by the close of the hearing that the Supreme Court may ultimately have to decide the issue.

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