Lawmakers are wrestling with how to regulate online prediction markets but have yet to reach a consensus on oversight of the increasingly popular gambling outlet.
Concerns over the platforms have come over the last year. Current and former National Basketball Association players were accused of providing confidential information to gamblers to inform bids they placed on online markets. And off the court, a $30,000 bet was placed on Polymarket ahead of the United States’ capture of Venezuelan President Nicolás Maduro. Lawmakers themselves have also faced scrutiny for insider trading.
“I think that we need to make sure predictive markets are treated as a form of gambling,” Sen. John Hickenlooper, a Democrat on the Senate Committee on Commerce, Science and Transportation, told NOTUS. “Because so often there may be some level of skill involved, which is what they say about gambling as well. But clearly the highly risky nature is the same in predictive banks as what we see in gambling.”
Online prediction markets have seen explosive growth since 2018, when the Supreme Court struck down a law that made bookmaking illegal in the majority of states.
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As states have pushed to legalize sports gambling, legislatures have tried to implement safety procedures. Some of these policies include creating age-verification processes and warning customers about gambling addiction.
But online prediction markets are not required to abide by state laws, as they are governed by the Commodity Futures Trading Commission.
“For them to be regulated by the commodities exchanges in the commodity markets just doesn’t make sense,” Hickenlooper added. “It’s much too lenient. Those federal agencies don’t have any experience in regulating gambling.”
Rep. Byron Donalds, a Republican from Florida and a member of the House Financial Services Committee, which has jurisdiction over prediction markets, said it’s “difficult” to say whether Congress will be able to pass a regulatory bill this term.
“People like going online and placing their views with their dollars on how they think things are going to go,” Donalds told NOTUS when asked about the potential challenges of enacting legislation. “And so this is something that definitely has to be looked at very carefully. We also don’t want to encumber the American people from using their dollars how they see fit.”
On Wednesday, members of the Senate Committee on Commerce, Science and Transportation peppered experts on how to better regulate the markets.
Harry Levant, the director of gambling policy at the Public Health Advocacy Institute, said during the hearing that the lack of regulation is putting children at risk.
“There’s a huge need for federal oversight because of what’s happening with children and young adults and families with online sports gambling,” Levant said. “But it’s significantly worse now with prediction markets, because they’re acting under color of federal law targeting people as young as 18.”
Sen. Marsha Blackburn pressed Patrick McHenry, a senior adviser for The Coalition for Prediction Markets, to ensure children aren’t using them.
McHenry, a former congressman, told Blackburn that “there’s a complete ban” on minors using prediction markets and that coalition members — including Kalshi and Crypto.com — “adhere to best practices on advertising.”
“The goal is to get customers that will be repeat customers that are interested in participating, but not targeting kids. Every enhanced tool that we can take, and our members’ companies can take, to ensure that under 18 don’t even see our advertising online is a very important mark,” McHenry said.
After the hearing, Sen. Ted Cruz, the chair of the committee, called the session “productive” but did not commit to moving legislation.
“It is a serious issue that merits congressional attention, and there is bipartisan interest in acting and leading on this issue,” Cruz told NOTUS. “The details are still being worked out. I mean, the process of crafting legislation takes some time.”
This story has been corrected to reflect the number of current and former NBA players accused of providing insider information to online gamblers.
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