SAN DIEGO - The national debate over prediction markets has moved well beyond the courtroom, with state lawmakers, gaming industry executives, and regulators warning that the expanding products could reshape gambling regulation as supporters continue to argue they are federally regulated financial instruments rather than sports betting.
- Former Congressman Mick Mulvaney argued sports event contracts offered by prediction markets are gambling products rather than legitimate investments, challenging the CFTC's role in overseeing the emerging industry.
- Gaming regulators, attorneys and industry advocates warned prediction markets could undermine state sports betting frameworks by offering wagering-style products outside traditional gaming oversight.
- The legal fight between prediction market operators, state regulators, and the federal government continues to raise broader questions about federal authority, state gambling regulation, and the future of event-based markets.
That divide was on full display during multiple discussions at the National Council of Legislators from Gaming States' Summer Meeting in San Diego. Multiple panels of gaming attorneys, state regulators, and policy experts debated how Congress, the courts, or federal regulators will ultimately determine the future of sports event contracts.
Mulvaney, a former South Carolina congressman who now serves as executive director of the Gambling Is Not Investing advocacy organization, opened the conference with some of the strongest sentiments against prediction market operators, which maintain they are federally regulated commodities trading platforms. Mulvaney argued prediction markets offering contracts on sporting events are fundamentally gambling despite efforts to market them differently.
"If I buy a contract on the outcome of the Padres game tonight, that's not an investment," Mulvaney said. "That is gambling."
Mulvaney questions CFTC oversight
Mulvaney said the industry's messaging has blurred the distinction between investing and wagering, making the issue easier to explain to lawmakers than the legal questions surrounding the Commodity Exchange Act.
"I also know the difference between gambling and investing," he said. "When we start to blur the lines, we've got a problem."
Much of his criticism centered on the role of the Commodity Futures Trading Commission (CFTC), which has allowed exchanges, including Kalshi, to list sports event contracts while defending its authority in multiple federal lawsuits.
Mulvaney argued the agency was created to oversee commodity and derivatives markets rather than consumer gambling.
"The CFTC is there to protect markets," he said. "It's like telling a baseball umpire to go referee a soccer match."
Mulvaney, who served five terms before serving as White House Chief of Staff in the first Trump administration, acknowledged Congress is unlikely to resolve the dispute legislatively. He encouraged state lawmakers to continue asserting their authority over gambling policy while participating in the federal regulatory process through substantive comments on proposed CFTC rules.
Mulvaney is on the opposite side of political support from many of his former Republican colleagues. The GOP has tended to be more supportive of prediction markets, and the Republican-controlled Congress has taken little significant action despite the introduction of multiple bipartisan bills.
Kalshi and Polymarket, the nation’s two most prominent prediction market operators, are advised by Donald Trump Jr. The president has also appointed a CFTC that has vociferously backed market operators despite conflicting views on the issue by Trump himself.
Broader context
Supporters of prediction markets continue to reject the characterization that sports event contracts simply repackage sports betting. They argue exchanges operate under the Commodity Exchange Act and are regulated by the CFTC rather than state gaming regulators. They also contend event contracts serve legitimate hedging and price-discovery purposes alongside political, economic, and other markets, making them financial products.
Those competing arguments have become central to an expanding legal battle stretching across multiple states.
Kalshi has challenged efforts by several state gaming regulators to block its sports event contracts, arguing federal commodities law preempts state restrictions. Meanwhile, commercial gaming operators, tribal gaming interests, and many state regulators have argued the contracts function as sports wagering and undermine state regulatory frameworks built since the repeal of the federal sports wagering ban in 2018.
The dispute has expanded beyond litigation. The CFTC has proposed broader rules governing event contracts, while several states have introduced legislation aimed at restricting or clarifying prediction market activity. At the same time, appellate courts continue weighing questions over the scope of the agency's authority, setting the stage for what many legal observers believe will ultimately become a U.S. Supreme Court case.
The discussions in San Diego illustrated that while both sides remain deeply divided over whether sports event contracts constitute gambling or financial products, they largely agree on one point: The outcome will help define the balance of power between federal regulators and the states in overseeing the next generation of event-based markets.
