A new advocacy group, Americans for Fair Markets (AFM), has launched ahead of the midterm elections to push for federal regulation of prediction markets, as legal clashes between federal and state authorities intensify and congressional scrutiny grows.
AFM is backed by prediction market platform Kalshi and has brought on former White House Deputy Chief of Staff Taylor Budowich as a strategic advisor. The group says it will campaign for a federally regulated environment for prediction markets while supporting strict limits on insider trading and bans on markets tied to violence.
High-profile political figure joins AFM
Budowich previously oversaw communications, speech writing, and cabinet affairs at the White House before leaving last year after serving as a senior aide. He then led the main pro-Trump super PAC, according to public records.
At AFM, Budowich is expected to help shape the group’s strategy as it navigates a politically charged debate over whether prediction markets are a form of gambling or a financial instrument that falls under federal oversight.
Coordination with broader industry coalition
AFM plans to work in tandem with the Coalition for Prediction Markets, an industry group whose members include Kalshi, Robinhood, and Coinbase.
The coalition is led by former Representatives Sean Patrick Maloney of New York and Patrick McHenry of North Carolina, and is focused on building support in Washington for a national regulatory framework.
Rapid market growth and rising scrutiny
Prediction markets have expanded quickly since the 2024 elections, when retail traders were able to place wagers on key races. Platforms such as Kalshi and Polymarket have since reached valuations in the tens of billions of dollars, reflecting strong interest in trading on political, economic, and event-based outcomes.
Trading volumes have climbed alongside that growth. Total monthly volume across prediction platforms recently hit $29.8 billion. Kalshi has emerged as the sector leader, with volume up 13% in April to $14.8 billion, while Polymarket saw its first decline in eight months, down 8.9% to $10.2 billion.
Jurisdiction battle between federal and state authorities
The sector’s expansion has triggered a sharp jurisdictional dispute. Commodity Futures Trading Commission (CFTC) Chair Michael Selig has asserted that the agency holds exclusive authority over prediction markets, classifying them as financial instruments subject to federal derivatives regulation.
State regulators counter that these platforms are effectively gambling operations that violate local gaming and sports betting laws. That conflict has moved into courtrooms across the country, with more than 20 lawsuits and cease-and-desist actions active as states and federal regulators test the limits of their authority.
On March 12, 2026, the CFTC formally escalated its involvement by issuing an Advanced Notice of Proposed Rulemaking, seeking public input to shape a potential federal regulatory framework for prediction markets.
Minnesota ban triggers direct clash with CFTC
The confrontation reached a new level when Minnesota became the first state to completely ban the operation of prediction markets. Governor Tim Walz signed legislation that makes operating such a platform a felony.
The CFTC responded the next day by filing a lawsuit against the state, in what is now the most direct challenge to Minnesota’s position and to broader state claims that they can shut down these markets as illegal gambling.
The outcome of the Minnesota case is expected to indicate whether prediction platforms will face a patchwork of state laws or a single overarching federal standard.
Congressional inquiry into insider trading and compliance
Concerns about improper trading practices have grown with the sector’s scale. On Friday, House Oversight Committee Chairman James Comer opened an inquiry into possible insider trading at both Kalshi and Polymarket.
Comer has ordered the chief executives of both firms to turn over internal documents by June 5. The committee is seeking detailed records on how the companies:
- verify user identities
- enforce geographic restrictions
- monitor for unusual trading patterns that could signal wrongdoing
Any findings could feed directly into new legislative proposals, including potential bans on participation in prediction markets by government employees and public officials.
Platforms tighten rules on insider trading
Both major platforms have recently upgraded their compliance systems.
Kalshi has introduced screening tools to prevent political candidates from trading on elections in which they are directly involved. Polymarket has revised its rules to clarify the definition of insider trading and the procedures it uses to enforce those rules.
These changes follow public and regulatory concern about bets linked to sensitive geopolitical events. One high-profile example involved wagers tied to Venezuelan President Nicolás Maduro, which led to a $400,000 payout and raised questions about access to non-public information during international crises.
AFM’s policy agenda and market access stance
AFM says its agenda focuses on three main goals:
- protecting individual rights to access regulated prediction markets
- enforcing strict bans on insider trading
- prohibiting markets linked to war, terrorism, death, or assassination
The group argues that a clear federal framework would allow markets to function as information and risk-management tools, while safeguarding the public from abuses and limiting trading in the most sensitive categories.
What traders and platforms are watching next
For traders and platforms, the next key developments are expected to come from Washington and the courts:
- the House Oversight Committee’s investigation could reveal internal practices at Kalshi and Polymarket and spur new laws restricting who can trade and under what conditions
- the CFTC’s lawsuit against Minnesota will test whether states can impose outright bans or whether federal commodities law preempts those restrictions
The launch of Americans for Fair Markets adds a new, politically connected voice to an already contentious fight over how — and by whom — prediction markets should be controlled as their economic footprint continues to grow.
To see how regulated prediction-style markets work in crypto, explore Toobit’s event contracts guide and compare approaches.
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