US gaming groups urge Senate to ban prediction markets

Major U.S. gaming industry groups are urging the Senate to explicitly ban sports and casino-style prediction markets from pending cryptocurrency legislation, escalating a regulatory battle over rapidly growing platforms.

In a letter to lawmakers this week, a coalition including the American Gaming Association, the Indian Gaming Association, and the Association of Gaming Equipment Manufacturers argued that such markets amount to unregulated gambling and should not fall under federal financial oversight.

Industry says prediction markets bypass gambling laws

The coalition warned that prediction platforms have enabled what it called the largest expansion of unregulated gambling in modern U.S. history. According to the letter, these platforms sidestep voter-approved state frameworks and tribal agreements while presenting betting as a financial product.

The groups also claimed the trend is eroding tax revenue streams that fund local programs and public services, citing an estimated loss of more than $1 billion since early 2025.

The letter raised concerns about consumer protection, particularly for younger users, and argued that the Commodity Futures Trading Commission lacks the expertise and infrastructure to regulate sports and casino-style betting markets.

Call to limit CFTC authority

The coalition is asking Congress to clarify that sports wagering falls outside the CFTC’s jurisdiction and cannot be offered through digital prediction markets. Their push is tied to broader crypto legislation, including the Digital Asset Market Clarity Act, which is awaiting a full Senate vote after advancing through committee.

A separate bipartisan proposal, the “Prediction markets are gambling act,” would go further by amending existing law to explicitly remove sports-related contracts from the CFTC’s authority.

Regulators and states ramp up scrutiny

Federal and state regulators have already begun taking action. The CFTC has pursued cases asserting jurisdiction over prediction platforms in several states, including Wisconsin, New York, and New Mexico. Meanwhile, state authorities have moved against operators such as Kalshi and Polymarket for alleged gambling law violations.

Earlier in June, the CFTC proposed new rules that would allow limited sports-related contracts while banning those tied to extreme or sensitive events such as terrorism or war.

The proposal also draws a distinction between broad outcomes, like final game scores, and more specific events such as player injuries or referee decisions, allowing the former while restricting the latter.

A public comment deadline of July 27, 2026, is expected to shape the regulator’s final framework.

Trading activity surges despite uncertainty

Even as legal and political pressure mounts, activity on prediction platforms is accelerating. Kalshi reported $16.81 billion in monthly trading volume in May, up from $14.81 billion in April, while Polymarket recorded $7.08 billion, down from $9.01 billion.

Global events are driving additional demand. The ongoing World Cup helped push Kalshi to a record $6.38 billion in weekly volume ending June 14, including its first billion-dollar trading days. Combined weekly volume across major platforms has exceeded $8 billion.

The surge highlights the high financial stakes and growing user base, even as lawmakers and regulators debate whether these markets should be treated as financial instruments or prohibited as gambling.