Senate Banking Committee Democrats are pressing Chairman Tim Scott to hold a public hearing on prediction markets after committee Republicans met privately with Kalshi Chief Executive Officer Tarek Mansour, escalating a congressional dispute over how event-based financial contracts should be regulated.
In a letter sent Wednesday, seven Democratic senators argued that a Republican-only roundtable was not an adequate venue for examining an industry that increasingly overlaps with the mandates of both the Commodity Futures Trading Commission and the Securities and Exchange Commission. The lawmakers said an open hearing would allow the committee to examine consumer protections, market integrity and the legal classification of contracts tied to corporate and financial outcomes.
The letter was signed by Senators Elizabeth Warren, Catherine Cortez Masto, Jack Reed, Mark Warner, Raphael Warnock, Ruben Gallego and Angela Alsobrooks. Their request places the Banking Committee more directly into a policy debate that has largely been handled by the House and Senate Agriculture Committees, which oversee the CFTC.
Scott’s office said the Republican meeting with Mansour, held at 10 a.m. Wednesday, examined “securities-linked products,” including how such products are used and which policy questions Congress may need to address. Scott also raised retail-participant protections and ways to bring financial activity onshore.
Kalshi did not immediately respond to a request for comment.
A fight over regulatory boundaries
The immediate issue is not simply whether prediction markets should be permitted. It is which federal agency should oversee contracts that can resemble commodities, sports wagers, derivatives or securities depending on how they are structured.
The CFTC has generally positioned itself as the primary federal regulator for prediction markets, which allow users to buy and sell contracts linked to the outcome of future events. Those events can range from elections and economic releases to sporting contests. A contract typically pays a fixed amount if the specified outcome occurs and nothing if it does not.
That framework has drawn resistance from several states, particularly over contracts tied to sports events. State officials have argued that such markets can fall within their authority over gambling and sports betting, while platforms have maintained that federally regulated event contracts should not be subject to a patchwork of state restrictions.
The Banking Committee’s interest adds a separate layer: contracts tied to the performance of publicly traded companies or financial indicators may raise securities-law questions. The SEC, which falls under the committee’s jurisdiction, oversees securities markets and rules intended to protect retail participants from inadequate disclosures, conflicts of interest and manipulation.
Democrats pointed specifically to contracts and instruments linked to company-performance metrics. A market based on whether a company exceeds an earnings target, for example, could attract scrutiny because the outcome depends on information central to securities trading. Such products may look different from a contract on rainfall or an election result, even if both use a similar all-or-nothing payout structure.
Earnings contracts sharpen the SEC question
The Democrats’ letter also referenced an effort by Cboe Global Markets to seek SEC approval for “all-or-nothing options” tied to companies’ earnings results, according to Bloomberg reporting in July.
That proposal illustrates why the jurisdictional debate is becoming more complicated. Traditional options exchanges already operate under the SEC’s securities-market framework. If an exchange lists a standardized contract that pays based on a company’s earnings outcome, it is plainly connected to the public-equities market. Prediction-market platforms offering economically similar products could face questions over whether the CFTC’s event-contract regime is sufficient or whether SEC rules should apply.
The distinction carries practical consequences for platforms. SEC-regulated venues and brokers face detailed requirements around customer protections, disclosures, market surveillance and the handling of customer assets. CFTC-regulated derivatives markets also operate under extensive federal rules, but the statutes and regulatory structures are different.
Congress has not established a single, tailored framework for prediction markets that touch both spheres. That gap leaves regulators, courts and exchanges to assess products individually, often after a platform has already announced or launched a contract.
Public scrutiny versus private outreach
The Democrats’ objection was directed as much at process as policy. Their letter said a private meeting limited to Republican members would not provide the transparency needed for a subject involving consumer risk, federal jurisdiction and rapidly evolving retail trading products.
A public hearing would put regulators, platform executives, legal specialists and consumer advocates on the record. It could also force committee members to address questions that have remained unsettled: when an event contract becomes sufficiently tied to a security to require SEC oversight, how federal rules interact with state gambling laws, and whether current anti-manipulation safeguards work for contracts based on highly public events.
Republicans have not publicly indicated that Scott will schedule such a hearing. His comments after the Mansour meeting suggest the committee is at least examining products at the edge of its traditional jurisdiction, particularly those with links to securities markets.
Prediction markets face a more fragmented policy landscape
The Agriculture Committees remain central to the debate because of their authority over the CFTC. Over the past year, those panels have reviewed prediction-market regulation as the sector has expanded beyond its earlier focus on political and economic forecasting.
The Banking Committee’s involvement could make the policy debate less about a single agency’s authority and more about product design. A contract based on a broad economic release may fit more comfortably within commodity-style event-market supervision. A contract based on a named company’s earnings, share-price threshold or corporate action creates a closer connection to the information and instruments governed by securities law.
That division could shape where new products are listed and what compliance obligations their operators face. It also gives established exchanges and newer event-market platforms a reason to seek clarity before rolling out contracts that target the same audience.
The Democrats’ letter does not resolve that conflict, but it increases pressure for Congress to examine it in public. As platforms move closer to corporate and market-based outcomes, the question facing lawmakers is likely to become less about whether prediction markets exist and more about which rulebook governs each type of contract.
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