If Congress is looking for who created our current prediction market predicament, it may need only to look in a mirror. And if Congress wants somebody to do something about prediction markets, well, it should probably look in that mirror again.
- A congressional hearing dove into the law and history surrounding prediction markets, as well as the issues that have arisen as the exchanges have branched out into sports.
- Witnesses provided facts that show Congress created the legal framework that arguably enabled these markets, and that Congress could also explicitly ban or further regulate sports event contracts.
- While courts, states, and the CFTC continue battling over jurisdiction, lawmakers acknowledged that Congress probably has more of a role to play.
Is this some earth-shattering epiphany? No. Is betting on sports via an exchange all that new a thing anyway? Again, no. And is Congress already trying to legislate new rules for prediction markets? Actually, yes.
Still, the arguably unrealized potential impact of Congress on prediction markets was one conclusion I came to while watching Tuesday’s two-hour meeting of the U.S. House of Representatives' Subcommittee on Commodity Markets, Digital Assets, and Rural Development.
Congress has been the dog that hasn't barked, or bitten, perhaps, amid the recent prediction market boom. And that boom has been mostly fueled by what many consider as offering de facto sports wagering all over the United States via the "yes/no" trading of sports event contracts.
Yet Congress could still intervene. The real questions are whether it will intervene, how it might do so, and whether a majority of lawmakers is content with - or simply oblivious to - the current state of prediction markets.
House Ag Subcommittee Chair Dusty Johnson gavels today's meeting over, but not before saying that while the courts or CFTC may ultimately clarify the legality of sports prediction markets, Congress should not be silent. Johnson says he thinks there's work for them to do. pic.twitter.com/MW3JqanLtY
— Geoff Zochodne (@GeoffZochodne) July 21, 2026
Which brings us to Tuesday’s subcommittee meeting, which was officially about “Examining Customer Protections and Market Integrity in Sports Event Prediction Markets.”
In other words, protecting traders (or “bettors,” depending on how you see it) and market integrity when it comes to the new and exploding world of sports-related event contracts.
The agriculture subcommittee’s chair, Republican Rep. Dusty Johnson of South Dakota, noted that some of the witnesses before them believed more clarity could be useful, particularly as prediction market-related litigation is raging across the U.S.
Time to clock in
However, Johnson suggested that while the courts and Commodity Futures Trading Commission (CFTC) may alone provide that clarity, Congress should probably say something as well.
“Courts are acting in this space, the commission is acting in this space," the chair said. "I do not believe that the committee, that Congress, should be silent. I do think there is work for us to do here."
So, from the sounds of it, there will be more congressional hearings on prediction markets. That means ample opportunity for federal lawmakers to try to do some work.
However, Democratic Rep. Kristen McDonald Rivet of Michigan noted that the “philosophical conversations” held in a committee room can clash with what’s actually happening.
In the real world, federally regulated prediction markets are offering sports event contracts that look a lot like sports betting. State sports betting regulators and state lawmakers are seeing this and taking legal and regulatory action. Lawsuits from both sides are flying. And then the federal regulator of prediction markets, the CFTC, is suing and intervening legally as well to try to guard its turf.
As far as I can determine, the last time the CFTC exercised its emergency authority was in 1980 when President Carter announced an embargo on Soviet grain. Prediction-market law is the best. https://t.co/KbX3itUz39
— Rob Schwartz (@FormerCFTCGC) July 14, 2026
McDonald Rivet raised the recent decision by the CFTC to order Kalshi to, essentially, defy a Michigan court and fulfill open trades following a legal loss there. In other words, a judge telling a prediction market to go one way, and its federal regulator telling it to go the other.
“The Commodity Exchange Act requires the CFTC to provide a uniform national market in derivatives transactions,” a press release said.
Rob Schwartz, a partner in the commodities and derivatives practice at Morgan, Lewis & Bockius, as well as the former general counsel of the CFTC, told the subcommittee that it was an “extraordinary action,” and one not taken by the commission for more than four decades.
"I think more than anything else it speaks to the need for clarity in this space,” Schwartz said.
What does clarity look like? And who should provide that clarity, the courts interpreting state and federal law, the federal regulator, or the federal lawmakers who wrote the federal law? As Johnson suggested, Congress could have more of a role to play.
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All the rage
Meanwhile, the debate rages on. And, again, the debate is mostly that prediction markets offer sports-related event contracts for trading that may look a lot like sports betting, but that the exchanges claim fall solely under the oversight of the CFTC.
This does not sit well with many states, which are now trying to assert their historical gambling rights. It also doesn’t sit well with Native American tribes with gambling businesses, who fear hits to their revenue that is spent in their communities.
“We support responsible innovation, the use of futures to hedge risks and to ensure fair pricing,” Indian Gaming Association Chairman David Bean testified on Tuesday. “However, we strongly oppose the prediction markets that have manipulated a weak regulatory agency to offer nationwide online sports gambling to kids as young as 18.”
Bean urged members of the Agriculture Committee to advance H.R. 7840, the proposed Event Contract Enforcement Act, which would prohibit sports event contracts. He also said they view the whole issue “from a governmental lens,” and Tuesday’s hearing highlighted that Congress could try to stop this whole fight right now if it agreed to do so.
Under my leadership, the @CFTC will continue to defend our exclusive jurisdiction over all manner of commodity derivatives, including prediction markets.
— Mike Selig (@ChairmanSelig) July 10, 2026
To the states seeking to preempt our authority, we’ll see you in court. pic.twitter.com/v2eLRbAEY9
Schwartz provided historical facts that suggest Congress largely set the stage for the current situation.
In 1974, Schwartz noted, Congress created the CFTC and gave it “exclusive” jurisdiction over commodity futures and options. In 2010, the Dodd-Frank Act then expanded the CFTC’s oversight to include exchange-traded swaps, which is technically what the sports-related event contracts offered by prediction markets are classified as.
The definition of swap “is sweeping,” Schwartz told the subcommittee, “and as a result, so is the CFTC's exclusive jurisdiction.”
In other words, Congress created the conditions for prediction markets to try to offer sports event contracts, pending CFTC approval or lack of disapproval. The CFTC is currently proposing to refine its approach, albeit in a way that would permit most sports contracts.
Forbidden onion futures
Nevertheless, Congress also has the power to prohibit sports event contracts entirely.
“Congress, of course, has any number of ways to put the controversy to bed, like it did in 1958 when it prohibited onion futures, or in 2010 when it forbade futures on box office receipts,” Schwartz said. “If Congress wants to prohibit sports event contracts, it should say so clearly in the (Commodity Exchange Act)."
However, as things currently stand, “and consistent with Congress’ many decades of refusing piecemeal regulation of these national markets by the 50 states,” the CFTC’s oversight remains exclusive, Schwartz added.
I have a better chance of winning the state regulated Powerball than Congress doing anything on prediction markets. https://t.co/HTWbRcmxxh
— Shawn Fluharty (@WVUFLU) July 21, 2026
So, there’s an explanation for why things are the way they are, and how they could possibly change - if Congress wants them to change. Or, rather, if a majority in Congress wants them to change.
It should be noted that the odds of Congress passing any bill right now aren’t good. Just look at the ongoing failure to restore a 100% gambling tax loss deduction.
Nothing is something
It may be that a congressional majority likes what prediction markets are doing, and wants it to continue. Any additional action Congress takes could be to the benefit of the exchanges as well. What if they pass a "SPORTS EVENT CONTRACTS ARE OK, ACTUALLY Act"?
Moreover, inaction right now keeps the status quo going, which could be good or bad depending on your perspective. Kalshi said it just added three million new users during the World Cup, so the current impasse is working pretty well for the prediction market operator. Congress debating regulation, rather than prohibition, is probably a win for prediction markets, too.
Perhaps the more pressing thing is that Congress should probably feel it has some responsibility here. The federal legislation that was passed in the past arguably led to the current predicament, wherein federally regulated prediction markets are locked in expensive legal battles with state gambling regulators over whether or not this is all just sports betting by another name.
"It may be that the courts and the commission alone can provide that needed clarity,” Johnson said. “And yet, if we don't ask whether or not there's an important role for Congress, we are not doing our job."
