The Blue Wave is already shifting the political seas for prediction markets.
- A Democratic-controlled Congress and growing state-level interest could bring more scrutiny and restrictions for prediction markets, particularly sports-related contracts.
- The future legality of prediction markets will likely be determined by the courts, potentially reaching the Supreme Court, as federal and state regulators clash over jurisdiction.
- Despite mounting political pressure and potential regulatory challenges, prediction markets continue to grow in popularity, with trading volume exceeding $130 billion in October.
A new, Democratic-controlled Congress is poised to make life more difficult for the federally regulated exchanges, or at least a little less comfortable. State legislatures are beginning to look toward 2027 as well, and lawmakers across the U.S. could be proposing plenty for prediction markets in the new year.
Now that the midterms have come and gone, the electoral focus is turning to the next presidential election in 2028. The next president could be less friendly toward the business of buying and selling sports-related event contracts.
Could anything change for prediction markets in the near term? Maybe on a state-by-state basis, as recent court rulings suggest additional geographic restrictions could be on the table.
Kalshi has terminated its advisory relationship with Donald Trump Jr., after his firm 1789 Capital led a funding round for rival Polymarket this summer story by @denitsa_tsekova & @BobbyAllyn 🖥️ https://t.co/94xW5y3Gic
— Emily Nicolle (@emilyjnicolle) November 12, 2026
But even then it’s hard to say. The Commodity Futures Trading Commission (CFTC), which regulates designated contract markets, has argued state-level restrictions on event contracts could conflict with federal law and its rules for exchanges.”
“Derivatives markets must operate on a uniform basis at a national scale in order to achieve the purposes set out in the Commodity Exchange Act,” CFTC Chairman Michael Selig said in a recent press release. “Geographic access restrictions are inconsistent with those purposes and the Act’s impartial access requirements.”
So where does that leave us? I see the next few years as being very loud and very angry about prediction markets. There could even be some state-level crackdowns. But “gambling” always lands lower on the political pecking order, and the exchanges will likely keep doing business in some form as we potentially grind our way toward a decisive Supreme Court ruling.
Until then, though, prediction markets will face plenty of pushback. The politics surrounding the industry are shifting. Maybe not just the politics of the people who own and operate them, but the politics in and around the exchanges. It might all be on the table now.
Where the buck actually stops
Donald Trump Jr. is no longer advising Kalshi, a purportedly mutual cutting of ties that followed the president’s son’s venture capital firm taking a stake in a rival, Polymarket.
Whatever the reason, the end of the advisory relationship comes as the new Congress will try to probe the Trump family’s business interests. Prediction markets could be one aspect of that, so a little bit of daylight between them and the administration may not hurt.
And Congress does plan to pry into prediction markets in some way. Among other possible things, Democratic senators are already pressing the White House for more detail about safeguards against potential insider trading.
“Democratic control of Congress could increase hearings, CFTC scrutiny, and legislation around insider trading, consumer protections, and sports contracts, but we do not expect an outright federal ban,” stock analysts at Jefferies wrote on Nov. 4. “Rather, risk shifts toward a more restrictive framework or product segmentation, with sports-like contracts most exposed, while bipartisan legislation could provide greater regulatory clarity.”
Now, could Congress actually pass a bill that would restrict prediction markets? Maybe, but maybe not.
“Any bill would need to be signed by the President, which we view as unlikely,” stock analysts at Citizens wrote in another Nov. 4 note to clients. “We also believe Congress lacks the ability to override a presidential veto with a two-thirds majority.”
That likely leaves the legality of sports-related event contracts to be decided by the courts, and, in particular, the Supreme Court. Citizens said recent chatter suggests “a potential decision sometime between this summer and 2028.”
In the meantime, the debate over prediction markets and their sports and other event contracts will rage on, with critics likely to become much louder over the next few years.
Some of the calls could be coming from inside the house of the CFTC. The president has finally nominated two other commissioners for the agency, which has been a one-man show under Selig. One of those nominees is a Democrat, potentially setting up some internal pushback on prediction market policy within the CFTC.
.@POTUS made two strong bipartisan picks for @CFTC Commissioners with Nathan Anonick and Matthew Rowland. I congratulate them on their nominations and look forward to working with each of them upon their confirmation by the US Senate. https://t.co/pLyf4061YY
— Mike Selig (@ChairmanSelig) November 12, 2026
Then there are the state legislatures.
In Texas, for example, a bill was prefiled for 2027 that would restrict prediction markets, prohibit certain event contracts, and require traders in the state to be at least 21.
That could clash with the stance of the CFTC and prediction market operators, which is that the business is under federal jurisdiction. On Friday, the CFTC even sued its 11th state, Arkansas, in defense of prediction markets.
The best argument prediction markets may have for their existence is their rising trading volume, which points to increasing activity on the exchanges. Trading across the exchanges topped $130 billion in October, a new high, according to Aldrin Research.
However, that popularity is also why prediction markets are facing pushback. Every day that passes, another person finds their way onto those platforms. Prying them away becomes more difficult.
So the urgency will continue in the courts and in the public square. We’re going to be in for some loud and long days, weeks, months, and years.
