Prediction market platforms such as those run by Kalshi and Crypto.com drew two hours of critical questioning in a US Senate Commerce Committee hearing, including scrutiny of the platforms’ advertising practices, regulatory disputes and the cheating they may encourage.
“We want athletes competing on merit, but the opportunity to make money can tempt players — and sometimes even athletes themselves — to underwrite a safe bet,” Sen. Ted Cruz, a Texas Republican who chairs the committee, said during Wednesday’s hearing. He said high-profile incidents of player cheating “raise doubts among fans.”
Highlighting some recent cases, Cruz said: “NBA players and coaches are accused of manipulating performances and providing inside information to win bets. Two major league baseball pitchers allegedly rigged their own fields in exchange for money. [Major League Soccer] suspended two players for knowingly receiving yellow cards to win bets, and the UFC has canceled fights and terminated contracts over suspected match-fixing.”
“It’s not uncommon for fans to scroll through Twitter on a Sunday afternoon in the fall to see posts speculating that a controversial call by an official was related to gambling,” Cruz said.
Other lawmakers focused on marketing that promotes problem gambling or that has reached youth who are otherwise meant to be blocked from betting. Senator John Hickenlooper, a Colorado Democrat, accused the companies in the prediction markets of unleashing the “hounds of hell” in social media and marketing to “prey on our youth.”
Patrick McHenry, who was a prominent member of the House of Representatives until his recent retirement, is now an advisor to the Coalition for Prediction Markets, representing Kalshi, Crypto.com, Robinhood, Coinbase and others. He said that transactions are not allowed for anyone under 18 and that the average age of users is 33.
Problem players
Harry Levant, director of gambling policy at the Public Health Advocacy Institute, testified Wednesday, telling lawmakers he was a recovering gambler and bemoaning the “avalanche of unregulated advertising” from companies in the prediction market.
“It’s a known addictive product, just like heroin,” he said.
Earlier this week, Kalshi’s co-founder and CEO, Tarek Mansour, took to social media X to highlight his company’s $2 million commitment with the National Council on Problem Gambling to support a “dealer health and safety” initiative.
And still other lawmakers on Wednesday dove into the fast-growing industry’s avoidance of state regulators and competition with regulated gaming on American tribal lands, where revenue is a core support for the economic health of tribal reservations.
CFTC
Even as senators scrutinize the event contract space, the Commodity Futures Trading Commission, which regulates derivatives trading platforms, is continuing a lawsuit filed Tuesday to stop a new law in Minnesota that would keep prediction market activity illegal there. The regulator adds this to a growing list of lawsuits the federal agency has brought against states that have tried to restrict prediction markets or declare them in violation of state gambling laws.
“This Minnesota law turns legal operators and participants in prediction markets into criminals overnight,” CFTC Chairman Mike Selig said in a statement, which added this case alongside similar agency battles against Arizona, Connecticut, Illinois and New York.
Selig has waged a legal campaign to defend his agency’s authority to monitor and regulate prediction markets, which are managed on registered platforms under CFTC rules. Meanwhile, his agency — where he is the sole member of what is meant to be a five-member commission — is also pursuing a formal rule to establish tailored standards for the sector.
McHenry defended the CFTC role Wednesday.
“The CFTC, as a policeman on the beat, has the capacity to monitor this market, just as they have with the broader commodity marketplace that has existed and thrived for decades,” McHenry said.
Senator Hickenlooper responded: “You’re the first person who’s told me that you think they think the CFTC is up to the standards.”
One of the witnesses, Bill Miller, the president and CEO of the American Gaming Association, argued that the federal regulators are “absolutely not competent to handle this, and two, they are absolutely hurting tribes and states financially.” He added that “it was never the intent of Congress to create a federal department of gambling through the CFTC.”
McHenry argued that these event contracts are derivatives belonging to “fundamentally different business models” from bets placed with gambling companies. Likening them to long-settled grain futures, he added that “our member companies have enhanced surveillance that is greater than any casino and better than any sportsbook in the country.”
Finally, Speaker Cruz said, “The Supreme Court may have to decide the issue.”
