Prediction markets drew a fresh burst of attention from Washington this week as lawmakers weighed several new bills aimed at tightening oversight of the fast-growing industry.
Still, the mounting scrutiny did not slow the sector’s breakneck growth, with event contracts posting record monthly volumes and attracting billions of dollars in institutional capital.
Kalshi’s CEO criticized U.S. lawmakers' bid to ban sports contracts. Source: X/Tarek Mansour
U.S. lawmakers floated three federal bills this week aimed at sports contracts and insider trading.
On Monday, two U.S. senators proposed the Prediction Markets Are Gambling Act, which would prohibit CFTC-registered entities such as Kalshi and Polymarket from listing contracts that closely resemble sports bets or casino-style games.
On March 25, two members of the House of Representatives introduced the PREDICT Act, which would bar senior government officials from participating in insider prediction market trading.
The following day, two Democratic Senators introduced the STOP Corrupt Bets Act, which would ban event contracts tied to elections, sports, government actions, and military moves.
Analysts at TD Cowen said the proposed bills are unlikely to become law this year, but cautioned that longer-term policy risks remain high.
“The real threat, in our view, is the 2028 presidential election given bipartisan concerns about event contracts overriding state gaming laws,” Jaret Seiberg, a managing director at TD Cowen, reportedly said in a Monday note.
Meanwhile, officials in nearly a dozen U.S. states have taken legal action against prediction markets, including Kalshi and Polymarket, arguing the platforms violate state gambling laws.
Federal regulators are scrambling to keep pace. On March 24, Commodity Futures Trading Commission Chair Michael Selig launched a new Innovation Task Force focused on crypto, artificial intelligence, and prediction markets.
Prediction platforms are moving to get ahead of a possible crackdown.
Kalshi and Polymarket both widened their trading bans this week, blocking candidates, athletes, team staff, and referees from markets where they may have special knowledge or direct influence over outcomes.
Prediction markets saw explosive growth in the past year. Source: TRM Labs
The mounting scrutiny mirrors a surge in trading activity across some of the market’s most sensitive categories, including sports and geopolitics.
In a March 27 report, TRM Labs said monthly prediction market volume had soared from $1.2 billion in early 2025 to more than $20 billion in January. The firm said much of the growth was driven by the rising popularity of contracts tied to geopolitical events, including the ongoing conflict in the Middle East.