The rapid growth of prediction markets continues to attract scrutiny from a section of the Senate. Most recently is through the introduction of a bill proposing that these platforms stop offering sports-related event contracts to traders.
The bipartisan Prediction Markets Are Gambling Act is sponsored by Senators Adam Schiff and John Curtis. It argues that allowing these platforms to do this infringes on tribal sovereignty. Additionally, the senators question whether any public revenue is derived from these platforms and the integrity of the markets. With the bill yet to be passed, what could happen next?
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How We Got to the Bill and What It Proposes
The heat prediction markets keep getting is not new. Right from the time they appeared on the scene in the U.S., there were questions about their legality and market integrity.
Unlike traditional land-based casinos,
prediction markets sites
can be accessed from anywhere in the U.S. Even more exciting for traders was access to real-time event contracts across diverse niches, from culture to politics, and even sports. This made them quite a hit, and in no time, the trading volume on these sites was incredible to say the least.
This got lawmakers interested. Initially, it was just concerns about insider trading and whether there were frameworks to curb that. Then it became a matter of how they are regulated. With the CFTC classifying them as derivatives markets, why are they offering athletic event contracts? Wasn’t this disadvantageous to tribes whose sovereignty depended on control of gaming products?
That prompted Senator Schiff (Democrat-California) and his Republican peer, John Curtis (Utah), to propose the Prediction Markets Are Gambling Act in March. Its key recommendation is to ban sports contracts on prediction markets.
Key Factors That Could Contribute to Its Passing
The bill has yet to pass, but some key factors could help it become law. They are:
- Prediction markets intrude upon tribal sovereignty: In sponsoring the bill, the two senators argue that these platforms’ operations do not account for tribal sovereignty, creating unnecessary tensions and income losses.
- Push by sports leagues: Some leagues, like the NBA, have called for bans on sports-event contracts, as they could prompt players to trade markets where they can influence performance-wise.
- State vs federal regulation argument: It’s also argued that if prediction markets are to offer sports markets and casino-style contracts, they should be regulated at the state level, not the federal level, as they are now.
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Potential Challenges to Sports Event Contracts Ban
No matter how compelling the reasons for a ban are, it’s worth considering the other side of the argument. These could potentially pose a challenge to the ban, and they include:
- Ongoing litigation: The prediction platforms are currently involved in litigation with multiple states. The outcomes of these cases could affect the bill’s chances of passing and implementation.
- Possibility of lobbying by casino operators: It has been suggested that, despite it being a bipartisan bill, the Prediction Markets Are Gambling Act may be part of a broader lobbying process by land-based and online casino operators.
- Platforms curbing insider trading: Prediction markets implementing stricter insider trading controls could see the pressure by leagues to ban sports contracts recede.
Will Sports Contracts on Prediction Markets Be Banned?
Calls for tighter regulation of prediction markets have intensified as the platforms’ growth has exploded. The Prediction Markets Are Gambling Act, introduced to the Senate by Senators Adam Schiff and John Curtis, is just one example of this push. The bill, if successful, would ban these sites from offering sports-related and casino-style contracts.
More than two months since its floating, it remains to be seen if it will pass. While discussions around it continue, you can still leverage these event contracts on platforms like Kalshi. Use any of our on-page banners to get started.
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