Key Points
- Major gaming trade organizations are calling on lawmakers to exclude sports and casino-style prediction markets from the Clarity Act
- Industry groups claim prediction platforms circumvent state gaming regulations by classifying wagers as financial instruments
- The Clarity Act has cleared the Senate Banking Committee and awaits a full Senate floor vote
- State regulators have launched enforcement proceedings against major platforms Kalshi and Polymarket for alleged gambling law violations
- The CFTC is actively litigating against states to maintain its regulatory authority over sports prediction contracts
A coalition of prominent gaming industry organizationsâthe American Gaming Association, Indian Gaming Association, and Association of Gaming Equipment Manufacturersâhas petitioned Senate lawmakers to prohibit sports and casino-related prediction markets from inclusion in forthcoming cryptocurrency market structure legislation.
According to their correspondence, prediction market operators have facilitated the most significant gambling expansion in American historyâachieved without electoral approval or explicit legislative authorization.
These trade associations contend that platforms are effectively providing coast-to-coast sports wagering capabilities through “sports event contracts” while categorizing these offerings as federally overseen financial instruments. This classification strategy, they maintain, allows operators to circumvent established state and tribal gaming frameworks.
“By offering nationwide sports betting through so-called ‘sports event contracts’ and branding it as a federally regulated financial product, these platforms have bypassed state and tribal law, weakened consumer protections, and undercut a system built on local control,” the letter stated.
The organizations also highlighted concerns regarding youth accessibility. They contend platforms provide insufficient responsible gaming safeguards while positioning gambling opportunities as investment vehicles.
Legislative Path Forward for the Clarity Act
The legislative focus centers on the Clarity Act. Last month, the Senate Banking Committee approved its iteration of the legislation. A comprehensive Senate floor vote represents the subsequent procedural milestone.
The gaming coalition is requesting that Congress utilize this legislation to clarify that sports wagering remains beyond the CFTC’s regulatory scope and cannot be facilitated through prediction market operators.
Their petition additionally contended that the CFTC lacks the institutional design to oversee gambling or sports betting activities, arguing the agency possesses neither the specialized knowledge nor operational framework necessary to supervise nationwide sports wagering.
The CFTC has contested this position. The regulatory body has initiated legal proceedings against multiple jurisdictionsâincluding Wisconsin, Illinois, Arizona, Connecticut, New York, and New Mexicoâto preserve its authority over sports prediction contracts.
Recently, the CFTC unveiled proposed regulations that would permit sports-oriented prediction markets while prohibiting contracts related to terrorism, political assassinations, and armed conflicts.
Regulatory Scrutiny on Kalshi and Polymarket Intensifies
Kalshi and Polymarket represent the dominant platforms within the prediction market sector. Numerous state authorities have initiated enforcement proceedings against both operators, alleging violations of state gaming statutes.
This past March, Senators Adam Schiff and John Curtis unveiled the Prediction Markets Are Gambling Act, legislation designed to prevent prediction contracts linked to sporting events or casino-style gaming from listing on registered platforms.
Kalshi reported $16.81 billion in monthly transaction volume during May, representing an increase from April’s $14.81 billion. Polymarket documented $7.08 billion in May volume, declining from April’s $9.01 billion.
The jurisdictional dispute between the CFTC and state gambling regulators over prediction market oversight has become inextricably linked to the Clarity Act’s legislative outcome.
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