Prediction Markets Make Drastic Changes After Lawmakers Introduce Bill to Reclassify Kalshi, Polymarket As Gambling Sites
Facing legislation that asserts they are little more than unregulated gambling websites, prediction market companies announced a slew of changes meant to assuage concerns that the sites could lead to corruption in sports, politics, and global events.
On Monday, 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.
“Sports prediction contracts are sports bets—just with a different name. And yet, these contracts are currently offered in all fifty states in clear violation of state and federal law,” Schiff said.
Prediction markets, such as Kashi and Polymarket, have long stated that they should be regulated akin to commodities trading rather than gambling.
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 House 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.
Aside from skirting federal and state laws that regulate gambling, some have raised concerns that the prediction markets are open to manipulation. Curtis and Schiff noted that some sports contracts have tens of millions of dollars in trading volume, with one potential March Madness winner contract already having more than $100 million in trading volume.
On Monday, Kashi immediately attempted to address those fears.
“Today, we’re announcing an expansion of our internal capabilities and policies against insider trading and market manipulation,” Kashi wrote. “We’re launching new technological guardrails that preemptively block politicians, athletes, and other relevant people from trading in certain politics and sports markets.”
“All markets have bad actors, and we believe that staying ahead of bad actors means developing new technology and policies,” Kashi wrote as the company described a new screening process and additional guardrails.
Meanwhile, Polymarket updated and published new intergrity rules. “Very proud of the team—these new integrity rules and pages simply articulate what we’ve always believed and enforced. Now it’s all in plain view,” Polymarket Chief Legal Officer Neal Kumar wrote on X.
Polymarket also updated its terms of use and launched a market integrity page. The page outlines banned behavior and defined insider trading including 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.
