A group of 17 Democratic Party Senators, including the outspoken Richard Blumenthal, has asked a Senate subcommittee to ban the Commodity Futures Trading Commission (CFTC) from using federal funds to fuel prediction market-related legal battles.
Scores of states have tried to use their gambling laws to police operators like Kalshi and Polymarket. Some have tried to ban prediction market players outright. Others are demanding that Kalshi and Polymarket instead apply for permits and pay special taxes.
The CFTC, however, says it alone has jurisdiction over prediction market operators. And it has backed up its claims by launching lawsuits against nine states.
But the group of Senators urged the Senate Appropriations Subcommittee on Financial Services and General Government to cut off the CFTC’s access to government funds for these cases.
“Through engaging in [a] campaign of litigation and intimidation, the CFTC risks becoming an instrument and enabler of online prediction markets’ efforts to bypass states’ consumer protections and oversight,” the Senators said in a joint statement.
The Senators said the CFTC was “creating a race-to-the-bottom in gambling.” They added that States and tribal groups had “rightfully identified” the fact that online prediction markets ”offer services that are no different than gambling.”
The CFTC has repeatedly stated that trades on prediction market contracts are swap deals, not wagers. And this, the regulator says, means only the CFTC has the power to police them.
Senators, CFTC Set to Clash
The Senators said that the original function of events contracts was to hedge against financial risks.
In the past, the Senators said these were limited to the agricultural and economic sectors.
But players like Kalshi and Polymarket have “distorted this purpose and infiltrated the world of sports, politics, and even foreign affairs,” the Senators alleged.
Blumenthal has repeatedly taken aim at both the CFTC and prediction market operators in recent months.
Earlier this month, he accused the CFTC of being “nothing more than a tool” of Kalshi and Polymarket. He also said the CTFC has put the markets ahead of its duty to protect consumers and uphold public safety.
The group of Senators used similar language in their latest release.
“Recent lawsuits filed by the CFTC against states regulating online prediction markets will only fuel a gambling public health crisis,” the Senators wrote. “[They] interfere with states’ and tribes’ longstanding prerogative to regulate or even restrict gambling.”
Election Trading Must End, Urge Senators
The Senators concluded their open letter to the subcommittee by calling on their colleagues to act fast.
The group said the subcommittee “exercises jurisdiction” over the CFTC and “serves as an important check against abuses of the CFTC’s regulatory authority.”
The legal battle for control over the prediction market platform looks set to intensify in the months ahead. This week, the Maryland State Elections Administrator waded into the fray.
Predictions market users traded tens of thousands of US dollars on the outcome of the Maryland primary elections on June 23.
“[Residents] are making a bet,” said the administrator. “Putting money in the prediction market, saying a candidate is likely to win or lose the election, is making a wager.”
Maryland officials said users who trade contracts on the result of elections could face criminal prosecution. They also said they were reviewing proposals to “go after the prediction markets.”
The group of Senators also included other outspoken critics of prediction markets, such as Jeff Merkley.
In March, Merkley co-authored a bill proposing to ban all prediction market contracts tied to election outcomes.
The same bill also proposes banning contracts pertaining to military operations and government actions.
Blumenthal has also co-authored a bill that seeks to ban war-related trades. Additionally, his bill calls for new consumer protections, more robust age verification, and a ban on credit card trades.
