Senate Questions Prediction Markets Over Sports Betting Concerns

Prediction market companies faced tough questions from lawmakers Wednesday during a Senate Commerce Committee hearing about sports betting, gambling addiction, and state gaming laws.

Senators from both parties criticized companies like Kalshi and Crypto.com over concerns about youth marketing, cheating in sports, and competition with state-regulated sportsbooks and tribal casinos.

Concerns About Cheating in Sports, Debate Over Marketing and Gambling Addiction

Committee Chairman Ted Cruz said sports integrity was one of the hearing’s biggest concerns. The Texas Republican pointed to several recent scandals involving athletes and gambling.

Cruz mentioned accusations against NBA players and coaches for sharing insider information and manipulating performances. He also referenced reports that two Major League Baseball pitchers rigged their own pitch outcomes for money, while two Major League Soccer players were banned for intentionally receiving yellow cards to help bets win. In another case, the UFC canceled matches and cut ties with fighters because of suspected match-fixing.

Cruz warned that these incidents are hurting fan trust in sports. He said many fans now question whether controversial referee calls are connected to gambling activity.

According to Cruz, prediction markets may create new opportunities for athletes and insiders to profit by cheating.

Senator John Hickenlooper criticized the industry’s advertising practices, especially on social media. The Colorado Democrat argued that prediction market companies are reaching too many young people through online marketing.

Patrick McHenry, a former Republican congressman who now advises the Coalition for Prediction Markets, defended the industry. He said users under 18 are not allowed to trade and claimed the average customer age is 33.

The hearing also included testimony from Harry Levant, director of gambling policy at the Public Health Advocacy Institute and a recovering gambling addict. Levant warned lawmakers about what he called an “avalanche of unregulated advertising” by prediction market companies. He compared gambling addiction to heroin addiction and argued that lawmakers should treat the issue as a public health concern.

Kalshi Announces Responsible Gambling Partnership, State and Tribal Gaming Concerns

Just before the hearing, Kalshi announced a new partnership with the National Council on Problem Gambling. CEO Tarek Mansour said the company would provide $2 million to support programs focused on “trader health and safety.”

Mansour said prediction markets are growing quickly and companies have a responsibility to educate users and create safety measures. Still, several senators questioned whether the announcement was enough to address concerns about gambling addiction and consumer protection.

Lawmakers also discussed how prediction markets affect state-licensed sportsbooks and tribal casinos. Tribal casinos depend heavily on gambling revenue to pay for important community services, and some senators worried prediction markets are taking business away without following the same state rules and tax requirements.

Prediction markets are regulated by the federal CFTC instead of state gaming commissions. That has created disagreements between federal regulators and states over who should control the industry.

Similar arguments happened during the rise of daily fantasy sports and the expansion of mobile sports betting after the Supreme Court regulated sports betting nationwide in 2018.

Federal and State Legal Battle Continues

The conflict between the CFTC and state governments is continuing in court. This week, the CFTC sued Minnesota over a new state law that would classify prediction market activity as unregulated gambling.

With Congress now paying closer attention and no new federal law proposed yet, courts may eventually decide who has authority over prediction markets in the United States.