Prediction markets' new insider-trading restrictions aren't enough, bipartisan senators say

• The 'Prediction Markets are Gambling Act' would prohibit CFTC-registered entities from listing sports betting and casino-style prediction contracts, giving states control instead of federal regulators
• Schiff cited concerns about 'vast amounts of insider trading' that current regulations cannot address, pointing to reports of bettors predicting Iran war events with extremely high accuracy, possibly using untraceable blockchain transactions
• A Federal Reserve study released Wednesday found that sports betting 'can have dramatic implications for household financial stability,' adding to growing bipartisan criticism of widespread prediction markets

Summary: Bipartisan Senators Push to Ban Sports Prediction Market Contracts

Key Development:

Senators Adam Schiff (D-N.Y.) and John Curtis (R-Utah) are maintaining their legislative effort to ban sports prediction market contracts despite new self-imposed insider-trading restrictions announced by platforms Kalshi and Polymarket.

Legislative Action:

The senators have introduced the "Prediction Markets are Gambling Act," which would:

• Transfer regulatory control over sports betting and casino-style games from federal regulators to states
• Prohibit Commodity Futures Trading Commission-registered entities from listing such prediction contracts

Companies Involved:

Both Kalshi and Polymarket recently announced measures to prevent athletes, politicians, and other relevant individuals from betting on their own campaigns or sporting events. However, lawmakers deem these self-policing efforts insufficient.

Key Concerns:

• Schiff warned of "vast amounts of insider trading" that current regulations cannot address, citing reports of bettors predicting Iran war events with suspicious accuracy using blockchain technology
• Curtis highlighted potential dangers, such as betting on high school athletes getting injured
• The legislation addresses concerns that speculative financial products are entering inappropriate spaces

Market Context:

Prediction markets have grown significantly in popularity and accessibility, drawing bipartisan criticism. Rep. Alexandria Ocasio-Cortez (D-N.Y.) recently stated "pervasive gambling is not good for society" following Polymarket's partnership with Major League Baseball. Federal Reserve economists also released findings Wednesday indicating sports betting "can have dramatic implications for household financial stability."

Outlook:

Despite legislative challenges in Congress, both senators expressed optimism about bipartisan support for their bill.

*Note: CNBC has a commercial relationship with Kalshi, including a minority investment.*