Prediction Markets Now Face Major Potential Ban on Most Popular Betting Targets

Proposed legislation is taking aim at prediction markets, promising to ban transactions on sports, politics, news, and entertainment.

Axios reported that Sen. Jeff Merkley, D-Oregon, plans to introduce the STOP Corrupt Bets Act on Thursday, while Rep. Jamie Raskin, D-Maryland will introduce a version in the House version.

The bill is the second to target the industry, which claims it should be treated more akin to commodities trading than gambling. Critics, contend the sites are violating state and federal gambling laws and are open to manipulation.

The sites allow people to buy contracts and make predictions on sports, politics, and culture. On Kashi contracts range from whether the Democrats or Republicans will in the midterm elections, to who will win the 50th season of Survivor.

If a prediction is correct, a person can cash out for a profit. But the contracts also can be sold like a commodity. Also, people are not betting against the house like in a traditional sports book; the value of contracts is solely determined by traders.

Earlier this week, U.S. Senators John Curtis, R-Utah, and Adam Schiff, D-California, introduced the Prediction Markets Are Gambling Act. The legislation is meant to reclassify prediction markets as gambling websites and remove the ability of the Commodity Futures Trading Commission (CFTC) from having the power to register them.

The new bill being proposed would actually go further, outright banning some areas, such as politics and sports, from being part of the prediction market landscape.

“When anyone can use prediction markets to make a well-timed bet on Congress passing a bill, government decisions or a military strike, it’s ripe for corruption and erodes public trust,” Merkley told Axios.

Two of the most prominent prediction markets, Kashi and Polymarket, attempted to address concerns this week. Kashi wrote that it was preemptively blocking politicians, athletes, and other relevant people from trading in certain politics and sports markets.

Meanwhile, Polymarket updated and published new intergrity rules, updated its terms of use, and launched a market integrity page. The page defines insider trading as trading on stolen information, trading on illegal tips, or making a trade when you can influence the outcome. The page also provides a way for people to report suspicious activity.