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AUTHORSHIP
26 May 2026
CFTC docket response, lawmaker action indicate growing salience of prediction market regulation
As prediction markets continue to grow, a high-profile CFTC rulemaking docket and scrutiny from Congress indicates newfound political salience
I. Introduction
ISSUE AREAS
CONSUMER PROTECTION
In March 2026, the Commodity Futures Trading Commission (CFTC) published a docket asking for public comment on the agency's proposed rulemaking on prediction markets regulation. The rapid growth of prediction market trading volume, accompanied by concerns about insider trading on life-or-death public matters, has brought visibility to a once-obscure issue. Organizations including More Perfect Union helped bring popular attention to the rulemaking process, and it ultimately received over 1,500 public comments on the matter.
The CFTC under the second Trump administration has been characterized as having generally aligned with prediction market services against regulatory efforts, particularly at the state level. Under chair Michael Selig, the regulator has approached prediction market providers as providers of financial products, in contrast to legal sports-betting operations. Nevertheless, in a political environment marked by growing concerns over gambling, lawmakers from both sides of the political spectrum have expressed concern about the rise of prediction markets. Public reports on potential insider trading on matters of war, alongside concerns about how these platforms are undercutting state gambling laws, will likely buoy future legislative efforts to regulate services such as Kalshi and Polymarket.
II. Areas of Scrutiny
INSIDER TRADING CONCERNS
In the absence of strong safeguards, prediction markets have become susceptible to insider trading by individuals with advanced knowledge of events in the public interest. This has included, among other things, political staffers betting on their candidate’s chances while having advanced knowledge of then-unreleased election polling. Of particular concern to observers have been the proliferation of likely insider trading on life-or-death matters, including issues as sensitive as warfare and assassinations.
These concerns have intensified in 2026 amid reports that people with advanced knowledge have made millions predicting events related to the Venezuelan political crisis and the ongoing war in Iran. The specific issue of so-called “death bets” has sparked public outcry, and has led to the introduction of specific congressional legislation to ban the practice.
SPORTS-RELATED BETTING
Beyond general concerns over the ethics of prediction markets and “death bets” in particular, the growth of prediction markets has also led to concerns that it will undermine state gambling laws. As it stands, 39 states and the District of Columbia have in place state rules governing sports betting, and critics of prediction markets argue that their growth will deprive states and local communities of tax money. Some 90% of Kalshi’s revenue came from sports-related betting in 2025 alone, making further platform growth a direct threat to state tax revenues derived from regulated sports betting. Despite these concerns, the CFTC under Selig has combatted state efforts to regulate prediction markets, with the commission quickly filing suit against Minnesota on May 19 following the passage of legislation to regulate these services.
III. Public and Lawmaker Backlash
CONGRESSIONAL ACTION
As of April 2026, a total of fifteen bills have been introduced in both houses of the 119th Congress concerning prediction markets regulation. These include bipartisan legislation including the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act (“PREDICT Act”; H.R.8076) and Public Integrity in Financial Prediction Markets Act of 2026 (S.4188), which both serve the broad aim of curbing insider trading among public officials. Beyond this, members of Congress have introduced targeted legislation on issues such as the previously mentioned “death bets” as well as the impact of prediction market growth on sports betting.
On April 30, the Senate finally took concrete steps towards curbing insider trading on prediction markets among their own ranks; though the measure is limited in comparison to broader legislation to crack down on these practices, at least one member publicly embraced its passage as a first step towards stronger guardrails. As Congress continues to consider child online safety rules, the possibility of legislative action on prediction markets is arguably made more likely given specific concerns over their impact on minors.
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LOBBYING CONCERNS AND PUBLIC BACKLASH
Amid an ongoing influence battle in D.C., lawmakers including Sen. John Hickenlooper (D-CO) have used public hearings to counter anti-regulation arguments made by pro-prediction market lobbying groups. These efforts have been assisted by campaigns by new watchdog groups to bring attention to the prediction market lobby’s practices via an advertising blitz.
If recent opinion polling is of any indication, it’s likely that these awareness campaigns will further the cause of regulation among the public. Ipsos polling released in March 2026, for example, found that 61% of Americans view prediction market betting as being closer to gambling than investing, with only 8% taking the opposing view; this stands in direct contrast to the views espoused by chair Selig. A survey conducted by Morning Consult, also released in March 2026, also found majority (59%) support for regulating prediction markets like gambling services, the single most popular option listed.
IV. Conclusion
The CFTC under the Trump administration has stood firm against state prediction market regulation, and political gridlock and hostility from the executive branch make real legislative action unlikely in the short-term. Nevertheless, advocates of regulation should be encouraged by bipartisan efforts in the face of the industry’s well-funded lobbying operation. The industry’s growth will likely be met with increased scrutiny, and it is clear that there are significant concerns inside and outside Capitol Hill with the platform's impact. Survey results that have found public support for firmer regulations on these platforms mean that the issue is likely to only rise in salience going forward.
V. Additional Citations
Analysis dates to research published on April 21, 2026. See: Alexander H. Pepper and Karl E. Schneider, "Prediction Markets Legislation in the 119th Congress," April 21, 2026, Congressional Research Service, https://www.congress.gov/crs-product/IF13207
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Aidan Smith
Founder, Labyrinth Insights
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