Senate Hearing on Prediction Markets Sets Up Fight Over Federal Sports Betting Standards

A Senate Commerce subcommittee hearing on Wednesday, May 20, produced clear signals that federal regulation of prediction markets is moving from a question of “if” to a question of “when.” The hearing, titled “No Sure Bets: Protecting Sports Integrity in America,” was convened by subcommittee chair Sen. Marsha Blackburn (R-Tenn.), who called it the first of “several” planned sessions and said she would work with Commerce Committee chair Sen. Ted Cruz (R-Texas) to advance legislation.

The hearing was nominally focused on sports betting integrity but quickly became dominated by questions about platforms like Kalshi and Polymarket. Both operate under the Commodity Futures Trading Commission rather than state gaming authorities, a distinction that critics say has allowed them to function as de facto sportsbooks while avoiding the taxes and compliance requirements that apply to DraftKings, FanDuel, and other traditional operators.

What Came Out of the Hearing

Cruz opened the hearing by acknowledging that prediction markets “for all intents and purposes are sports bets” when they offer event contracts tied to sporting outcomes. That framing put pressure on the CFTC’s existing position that such contracts are legal commodities products. American Gaming Association CEO Bill Miller testified that prediction markets are costing state governments significant tax revenue and undermining the consumer protection frameworks that state-regulated sportsbooks are required to follow.

Patrick McHenry, the former House Financial Services Committee chair who now advises the Coalition for Prediction Markets, defended the industry’s existing regulatory structure and urged Congress not to act before understanding how the CFTC currently oversees the space. His arguments received a cooler reception than he might have hoped, with multiple senators pushing back on the idea that CFTC oversight is equivalent to the guardrails in place at state-licensed sportsbooks.

Industry Context

The hearing comes at a moment of intensifying state-level conflict over prediction markets. The CFTC recently sued Minnesota after the state passed a law making sports event contracts a felony. Iowa recently signed legislation giving regulators new enforcement powers over sweepstakes casinos, and multiple states have moved to restrict or ban prediction market sports contracts outright. Blackburn said states are right to act but suggested federal minimum standards would create a more coherent national framework.

For traditional sports bettors, the implications are significant. DraftKings and FanDuel have both launched prediction market platforms, and a federal crackdown could reshape the competitive landscape. Blackburn said Congress needs to determine whether a federal minimum standard makes sense and whether the existing state-by-state approach to sports betting is sufficient to address the new reality created by CFTC-regulated event contracts. More hearings are expected in the weeks ahead.