Semafor reports that a coalition including commercial and tribal gaming interests has sent a letter to Congress urging members to include sports trading restrictions
A group including the American Gaming Association, the Indian Gaming Association, and labor unions is applying pressure to members of Congress to add language barring prediction markets from offering contracts based on sporting events in current legislation, according to a Tuesday report from Eleanor Mueller of Semafor. Such a provision could significantly curtail trading on exchanges like Kalshi, as market activity connected to sports accounts for a strong majority of the platform’s volume.
Entities like the American Gaming Association insist that sports contract trading has resulted in state and tribal governments losing revenue, motivating their calls for the market restrictions. However, there are multiple reasons to doubt that Congress will enact the desired provisions.
Report says coalition is pushing for prediction market sports trading amendment
According to Mueller, the letter calls upon Congress to take action on prediction market regulation.
An excerpt from the letter clarifies the coalition’s request.
“While our organizations may differ on other issues, including gambling policy, we are united in our concern that prediction markets have fueled the largest expansion of gambling in U.S. history over the past 18 months — without voter approval or legislative authorization. Congress should not wait while this nationwide expansion of gambling continues. It should use crypto legislation to reaffirm a simple principle: sports betting falls outside the CFTC’s remit and cannot be offered through prediction market platforms.”
Other than the American Gaming Association (AGA) and the Indian Gaming Association, the signers to the letter include the AFL-CIO’s Hotel and Gaming Trades Council and the UNITE HERE union. The letter calls for Congress to include provisions affecting trading sports event contracts on prediction market exchanges in a bill that aims to regulate cryptocurrency transactions. Potential legislation includes the Clarity Act (H.R. 3633), which has already passed the House of Representatives.
As Mueller points out, this action closely follows the AGA’s assertion that the trading of sports event contracts on platforms like Kalshi has cost state governments that regulate sports wagering $1 billion in lost revenue. If enacted, the restrictions sports contract trading would nullify recently proposed rules for that trading from the Commodity Futures Trading Commission (CFTC).
Bill language could conflict with pending CFTC regulations
The CFTC published its proposed rules for prediction market exchanges earlier in June, providing parameters about what the agency views as permissible in terms of contracts connected to sporting events. The rules would mostly allow such trading to continue, although there would be new restrictions on contracts that closely resemble proposition wagers at traditional sportsbooks based on individual athlete actions.
Should the CFTC’s proposed rules become final, the language that the AGA and others are pushing for would override the rules in part. The AGA is likely pushing for a total ban on all sporting event-based contracts on platforms like Kalshi.
Such provisions in Congressional bills are sure to draw pushback from prediction market operators, as sports event contract trading regularly accounts for over 80% of volume on Kalshi and is the sole focus of other exchanges like ProphetX. That’s the beginning of the obstacles that such legislation could face.
Potential roadblocks for Congressional action on prediction markets
Because of the regulatory role that the CFTC plays regarding prediction market exchanges, Congress and federal courts are the venues where the future of sports contract trading will be decided. Federal courts across the country are already engaged with such litigation, and a potential Supreme Court appeal is on the horizon.
The Supreme Court’s adjudication of whether prediction market exchanges can offer contracts based on sporting events could result in a favorable ruling for that activity. In that event, the only way to curtail such trading would be an act of Congress.
Congress could enact such provisions at anytime, but that would require a consensus on the topic. Proposed legislation regarding prediction market trading to this point has moved slowly, if at all, signaling that standalone bills on the subject either are not a priority or members of Congress are not in agreement on terms. Even the Clarity Act, which doesn’t currently address prediction market exchanges, has not seen activity since mid-May.
Adding prediction market provisions to crypto regulation legislation could simply result in that bill becoming bogged down, but entities that would like to see restrictions on sports event contract trading put into place have few other options but to push for such provisions. That pressure could amount to nothing more than lobbying of Congress, though.
Derek Helling
Derek Helling is a journalist who has covered the gaming industry for many publications since 2018. His coverage emphasizes the intersections of gambling with the business of entertainment, the evolution of the legal landscape, technology’s shaping of gaming, and the impact of gambling on society. When he isn’t working on his next story, he enjoys traveling with his wife and spoiling their pair of Munchkin cats.
