The US Senate Commerce Committee met Wednesday for a scheduled hearing on the influence of sports betting and the emergency of sports-related prediction market contracts. Expert testimony from multiple ends of the spectrum – from the AGA to prediction market lobbyists – was heard as senators contemplated how and whether to move forward on new legislation.
For the most part, the two-hour hearing featured statements by lawmakers who are concerned that prediction market “event contracts” are threatening existing tribal compacts and state-regulated sportsbooks. Contrary to the sentiments shared by the majority of members on the Senate Banking Committee, the Commerce Committee lacks confidence that the CLARITY Act adequately addresses prediction market regulatory concerns.
Below are several quotes from Wednesday’s Senate Commerce Committee hearing on prediction markets.
Senator John Hickenlooper (D-CO): “The CFTC has literally no experience in regulating sports betting. Even worse, CFTC has failed to use the authority it does have to protect sports bettors from insider trading, market manipulation, predatory advertising, and financial instability.” (12:55 timestamp)
Bill Miller (President & CEO of the American Gaming Association): “Gaming integrity frameworks are being undermined by so-called ‘prediction markets’ who are invading state, local, and tribal authorities.” (20:50 timestamp)
Senator Ted Cruz (R-TX): “Prediction markets have started offering ‘event contracts’ on sporting events, which for all intents and purposes are sports bets.” (48:55 timestamp)
Patrick McHenry (Senior Adviser for The Coalition for Prediction Markets): “Our member companies have enhanced surveillance greater than any casino and greater than any sportsbook in the country.” (1:15:00 timestamp)
Senator Maria Cantwell (D-WA): “The CFTC prohibited sports betting contracts for more than 15 years under [US Code § 40.11]. But, all of the sudden, starting in 2025, prediction markets began offering sports gambling contracts.” (1:30:30 timestamp)
Senator Jacky Rosen (D-NV): “Any federal action must recognize the strong, pre-existing state and tribal gaming regulatory regimes that ensure all sports betting – no matter what you call it; what it’s branded as – and is covered under current state and tribal laws.” (1:37:50 timestamp)
Congressional action regarding how prediction markets should be regulated could insert an additional variable into the judicial process that is currently playing out across the country. With that said, there are multiple, conflicting legislative proposals pertaining to sports-related products that exchanges provide and how they should be classified.
For the time being, the official stance of prediction market exchanges, as well as the CFTC, is that event contracts represent “swaps” and “trades” that fall under federal jurisdiction – even when they are related to sports contests. State gaming regulators, tribal authorities, and the AGA vehemently disagree with that stance, and believe that “event contracts” represent a label devised to skirt regulations imposed on sports bets.
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