In a move that has sent shockwaves through the fast-growing prediction market sector, Senators Adam Schiff (D-CA) and John Curtis (R-UT) introduced the Prediction Markets Are Gambling Act on March 27, 2026. The bipartisan legislation seeks to shut down a loophole that has allowed platforms like Kalshi and Polymarket to offer sports-related event contracts without obtaining full sports betting licenses.
Background: How Prediction Markets Exploded
Prediction markets first gained mainstream attention during the 2024 U.S. presidential election, where traders bet on everything from vote totals to cabinet picks. By 2025, the sector had pivoted hard into sports. Platforms began listing contracts on NFL games, NBA player props, and even obscure outcomes such as “Will the next pitch in a baseball game be a strike?” Unlike traditional sportsbooks, which must comply with state-by-state licensing, age-gating, and responsible gaming mandates, prediction markets operated under the Commodity Futures Trading Commission (CFTC) as “event contracts.” This lighter regulatory touch let them scale rapidly. In 2025 alone, the combined annual handle across all U.S.-facing prediction platforms reached an estimated $63.8 billion – more than 45% of the entire legal sports betting market.
Key Provisions of the New Bill
The Prediction Markets Are Gambling Act contains several targeted measures:
- Ban on Sports Event Contracts: Any contract whose payout depends on the outcome of a sporting event would be reclassified as illegal gambling unless offered through a state-licensed sportsbook.
- CFTC Restrictions: The bill directs the CFTC to stop approving new sports-related event contracts and to wind down existing ones within 180 days of enactment.
- Penalties: Operators face civil fines of up to $500,000 per violation, while individual traders could see accounts frozen and profits clawed back.
- Grace Period: Open positions on major 2026 events (FIFA World Cup, NFL season, March Madness) would be settled before the law takes full effect.
Market Size and Growth at a Glance
| Platform | 2025 Handle (est.) | Market Share | Primary Focus |
|---|---|---|---|
| Kalshi | $28.4 billion | 44.5% | Politics + major sports |
| Polymarket | $21.7 billion | 34.0% | Crypto-based global events |
| PredictIt | $4.9 billion | 7.7% | Niche college and props |
| Others | $8.8 billion | 13.8% | Emerging micro-markets |
| Total | $63.8 billion | 100% | — |
Industry Reactions Pour In
Kalshi CEO Tarek Mansour issued a strongly worded statement within hours of the bill’s introduction: “This legislation is a direct assault on free markets and innovation. Prediction platforms have delivered better odds, lower fees, and more transparency than legacy sportsbooks for millions of American adults. Shutting us down will only drive activity to unregulated offshore sites.”
Polymarket’s head of policy, Shayna Harris, added: “We have always maintained that our contracts are distinct from sports betting. This bill ignores years of CFTC precedent and threatens to erase billions in economic value.” On the other side, the American Gaming Association (AGA) welcomed the move.
AGA President Bill Miller stated: “Licensed sportsbooks operate under strict oversight designed to protect consumers. Prediction markets have operated in a regulatory gray area, leaving bettors exposed to potential manipulation and without the same safeguards against problem gambling.” Major operators including DraftKings, FanDuel, and BetMGM have quietly lobbied for the bill, arguing it levels the playing field and prevents revenue leakage.
Impact on Bettors and the Broader Market
If the bill becomes law, several immediate effects are expected:
- Shift to Licensed Books: Bettors will migrate to state-regulated apps, which could boost legal sports betting handle by 15-20% in the second half of 2026.
- Higher Costs for Traders: Prediction markets typically charge 1-3% fees versus 5-10% hold on traditional sportsbooks. Users may see reduced value on niche props.
- Crypto and Offshore Migration: Platforms accepting cryptocurrency are already reporting a 40% spike in new sign-ups from U.S. users seeking alternatives.
- Job and Tax Revenue Concerns: Kalshi and Polymarket together employ more than 1,200 people across the U.S. and generated roughly $380 million in federal and state taxes in 2025.
Analysts at Eilers & Krejcik Gaming project that up to 75-85% of current prediction market volume could disappear or move offshore within 12 months if the legislation passes unchanged.
Expert Perspectives
Legal scholar and gambling law expert Professor Rebecca Thompson of Georgetown University Law Center commented: “The core issue is whether an ‘event contract’ on a basketball game is functionally different from a moneyline bet. Courts have been split, but Congress now appears ready to draw a bright line.” Sports integrity advocate David Purdum, senior writer at ESPN, noted: “The explosion of micro-markets on prediction platforms has raised red flags about match-fixing. A single contract on ‘Will Player X score the next goal?’ can create powerful incentives for manipulation at lower levels of sport.”
What Happens Next
The bill has been referred to the Senate Banking Committee, where hearings are scheduled to begin April 15, 2026. A companion bill in the House, sponsored by Representatives Maxine Waters (D-CA) and Patrick McHenry (R-NC), is expected to move in parallel. Industry insiders believe the final version may include carve-outs for non-sports events (elections, weather, entertainment) while focusing strictly on athletic competitions.
References
- U.S. Senate Bill S. 1427 – Prediction Markets Are Gambling Act (introduced March 27, 2026)
- American Gaming Association 2025 Year-End Sports Betting Report
- Kalshi official statement, March 28, 2026
- Polymarket policy update, March 29, 2026
- Eilers & Krejcik Gaming Q1 2026 Prediction Market Forecast
- CFTC Advisory Note 2026-14 (March 26, 2026)
This developing story will continue to dominate betting industry headlines as lawmakers, operators, and millions of traders await clarity on the future of prediction markets in the United States.
