Dems urge CFTC to rein in prediction markets sports betting, insider

A group of Democratic lawmakers is urging the Commodity Futures Trading Commission to issue a rule that would aim to rein-in prediction markets, curb insider trading and prohibit certain types of event contracts.

In a letter first shared with CNBC and sent to the CFTC on Thursday, a group of congressional Democrats led by Jeff Merkley of Oregon., called on the federal agency to address “the rapid erosion of integrity” within prediction markets such as Kalshi and Polymarket.

“We strongly encourage you to use your authority to preserve the intent of prediction markets, and congressional intent behind the Commodity Exchange Act, by issuing a rule that prevents insider trading and corruption in the market and prohibits event contracts on the outcome of elections, war and military actions in the U.S. or abroad, sports, and government actions without a valid economic hedging interest,” the lawmakers wrote.

Sens. Richard Blumenthal of Connecticut, Chris Van Hollen of Maryland, Sheldon Whitehouse of Rhode Island and Rep. Jamie Raskin of Maryland also signed the letter.

Prediction markets have surged in popularity in the last year, drawing increased attention from lawmakers, particularly after a series of bets were placed on the platform Polymarket ahead of major world events.

Last week, a U.S. soldier was arrested for bets he allegdly placed on Polymarket ahead of military action in Venezuela that earned him $400,000. Kalshi, another prediction market giant, suspended and fined three candidates for elected office for allegedly trading on their own campaigns.

A series of bills introduced since the start of the year aim to curb insider trading and in some cases bar event contracts on sports, elections, military and government actions. Merkley led a bill in March that would prohibit certain government officials from using prediction markets entirely. Another bill, introduced by Merkley in the Senate and Raskin in the House, would bar prediction market bets on elections, war and sports.

In the letter, the group says event contracts tied to election outcomes “pose a danger to our democracy and elections.”

“These types of contracts did not exist before 2024 in the United States and for good reason,” they wrote. “Election-related prediction contracts create a financial incentive for political insiders involved in elections to subvert the will of American voters by altering their behavior.”

Sports are the most popular type of event contract by volume, making up almost 90% of bets made on Kalshi in the year ending in February, according to the Congressional Research Service. While sports also made up the biggest single category on Polymarket, the category accounted for 38% of event contracts on that…