The U.S. prediction market has recently been described as "a tale of two extremes." On one hand, bipartisan senators have introduced two federal bills aimed at "locking down" contracts for sports, war, and election events; on the other hand, Trump has unprecedentedly endorsed the prediction markets, stating they are much more accurate than "fake polls." Caught in the middle, Kalshi and Polymarket are busy proving their innocence while watching DraftKings' stock price fall to a new 12-month low. The PASA official website notes that the battle over the legality of prediction markets is escalating from regulatory shadow wars to a real battle in the capital markets.
The issue dates back to March 23. California Senator Adam Schiff and Utah Senator John Curtis jointly introduced the "Prediction Markets are Gambling Act," targeting CFTC-registered entities and aiming to block sports betting and "casino-style" event contracts. Schiff was blunt in his statement: "It's bad enough that the CFTC doesn't enforce the rules, but to actually green-light and promote growth is unacceptable. Congress must act now, or consumer protection, tribal sovereignty, and public tax revenue in the states will all be bypassed through this backdoor."
Just a few days later, Schiff and Curtis joined forces with two other senators to introduce the "Financial Prediction Markets Public Integrity Act." This time targeting federal officials and government employees—prohibiting them from using insider information to bet on prediction markets. Violators would face a minimum fine of $500 or twice the illegal gains, whichever is higher. Republican Senator Todd Young stated bluntly, "The recent activity in the prediction markets is concerning, especially for those with access to sensitive information who might exploit it."
Kalshi CEO lashes out: This is about protecting monopolies, not consumers
Facing this "one-two punch," Kalshi's CEO Tarek Mansour fired back on social media. He stated clearly, "The casino lobbying groups have been busy. Millions of people use regulated prediction markets because they are simply better products. Banning them will only push these transactions to completely unregulated offshore markets." He added, "These bills are not about protecting consumers; they are about protecting monopolies."
The capital markets have already "made a statement." On NASDAQ, DraftKings' stock price plummeted, hitting a 12-month low of $20.53 on Friday, dropping 12% over the week. Flutter didn't fare much better, with a weekly drop of 4%, and its stock price fell below $100 for the first time since 2022. Both companies have seen their stock prices fall by more than 40% over the past 12 months. Meanwhile, Penn Entertainment, which hasn't rushed into the prediction market, saw a slight increase in its stock price at the close.
Trump speaks on prediction markets for the first time: Much more accurate than fake polls
Interestingly, as regulatory crackdowns intensified, Trump rarely spoke about prediction markets. In an interview with The Washington Post, he compared the prediction markets during the 2024 election with traditional polls, labeling the latter as "fake polls." "They are quite accurate... I won easily," Trump told Max Raskin of New York University School of Law over the phone.
The data indeed supports his claim. For the 2024 election, the trading volume of event contracts related to the U.S. presidential election on Kalshi reached $535 million. A week before the election, the odds of Trump winning on both Kalshi and Polymarket were around 65%. On election night, as exit polls were released, his odds on Kalshi soared from 57.5% in the morning to 66.9% by 5 p.m. This "accuracy" indeed looks much better than many polling agencies.
However, Trump did not comment on Schiff's bill or the insider trading controversies involving event contracts related to Venezuelan President Maduro and former Iranian Supreme Leader Khamenei. Instead, his platform Truth Social, which partnered with Crypto.com last October, is preparing to launch a prediction market feature, although the launch date has not yet been announced. Incidentally, his son, Donald Trump Jr., is currently on the boards of both Kalshi and Polymarket.
Preventing insider trading and cheating, Kalshi and Polymarket take the initiative
In response to regulatory pressure, prediction market platforms are also taking action. On the same day Schiff introduced the bill, Kalshi implemented a new set of rules, blocking politicians, athletes, and politically sensitive individuals from specific markets. For example, staff and senators of the U.S. Senate are strictly prohibited from betting on contracts related to the Republican nominee for the Texas Senate. Employees of Political Action Committees (PACs), decision-makers at news organizations, political party employees, and anyone involved in vote counting are also on the prohibited list.
Kalshi's Chief Legal Officer Robert DeNault explained clearly, "For markets to function, it's essential that both parties believe the other is not cheating. Preventing cheating is not just a goal; it's the cornerstone of our business."
Polymarket has also updated its integrity rules, covering DeFi platforms and U.S. exchanges regulated by the CFTC. The new rules clarify trading standards regarding confidential information, illegal sources of information, and information that may be improperly influenced by insiders. Chief Legal Officer Neal Kumar stated, "The market needs clear rules. This upgrade clarifies the boundaries for every participant and showcases the compliance system we have built."
While Congress sharpens its knives, the industry proactively "patches up," and the president personally endorses the market. The regulatory tug-of-war over prediction markets in the U.S. is clearly far from over. The PASA official website will continue to monitor policy trends and market responses in this field.
————
This article is from "PASA-Global iGaming Leader," a gambling industry news channel:https://t.me/pasa_news
Original in-depth gambling channel:https://t.me/gamblingdeep
Free data reports: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
