In May, several days before Memorial Day weekend, the US Senate held its first hearing on sports betting in more than a year. Although the hearing, entitled, “No Sure Bets: Protecting Sports Integrity in America”, was meant to address a rash of sports betting scandals, it quickly devolved into a fiery debate on prediction markets.
This week, the House of Representatives took its shot at tackling a host of pressing issues surrounding the new asset class. A House subcommittee convened on Tuesday morning for a hearing on market integrity regarding sports derivative contracts. The hearing represented the first on the topic since members of Congress introduced more than a dozen proposed bills that have sought to establish guardrails on the multibillion-dollar industry.
As the recent 2026 Fifa World Cup indicates, public appetite for sports event contracts is significant. By some estimates, trading volume during the quadrennial event topped $50 billion. At the same time, the high volumes underscore a bitter dispute on the regulation of sports event derivatives, which states’ rights advocates claim are illegal.
Two gaming industry trade groups, the American Gaming Association and the Indian Gaming Association, believe that states and tribal nations are losing millions in revenue from the proliferation of prediction markets. Representatives from both associations testified at the hearing. Two other witnesses, a pair of attorneys, provided insights from the market perspective at the two-hour event. A fifth witness, Asaf Meir, CEO of Solidus Labs, gave testimony on the market surveillance capabilities that can be utilised to detect and enforce insider trading.
Alabama Representative Shomari Figures called the hearing the “most balanced” he’ has ever attended in terms of witness composition. The balanced composition generated strong intellectual debate on the topic, he emphasised.
Divergent positions
After prediction markets went mainstream in 2025, the battle over sports event contract has reached a fever pitch this year. The US Commodity Futures Trading Commission, the federal regulator on derivatives, has led a charge to defend the legality of sports event contracts against state governments throughout the country.
Advocates of prediction markets argue that the structure of sports event contracts are comparable to grain and corn futures, placing the derivatives under the purview of the CFTC. Since his appointment late last year, CFTC Chair Michael Selig has continually stated that the agency has jurisdiction over the regulation of event contracts on sports.
Against that backdrop, the House Agriculture’s Subcommittee on Commodity Markets, Digital Assets and Rural Development, hosted Tuesday’s hearing in the House Longworth Office on Capitol Hill. The overall House Ag Committee is chaired by Representative GT Thompson, a nine-term Republican from Pennsylvania.
Within a comprehensive set of proposed CFTC rules on sports event contracts released last month, the agency referenced a so-called public interest test on more than 500 occasions. Before the rules are formalised, the CFTC will decide if certain derivatives on sports are contrary to the public interest.
“This is an important rulemaking, and I am encouraged by the thought and work which went into the draft,” Thompson wrote. “It provides clear standards for the public interest and workable definitions for the key terms which have lingered undefined for so long.”
The comparison with gold
While the CFTC is typically composed of five commissioners, Selig remains as the lone Senate-confirmed member of the commission. IGA Chair David Bean testified that the CFTC is woefully understaffed, adding that under one man, it has gone from “crops to props”. The IGA believes that practically nothing differentiates a sports event contract from sports wagers such as over/unders, parlays and props.
Given the friction between the sides, any regulatory compromise seems to be far out of reach. Although it is plausible for Congress to establish a federal framework for prediction markets while states tax revenues on events contracts, state regulators are apprehensive of ceding control to the federal government. But Carl Kennedy, a derivatives attorney with experience at the CFTC, argued that certain assets can be regulated by multiple agencies.
As Kennedy pointed out, a person can buy gold from a local dealer under state law. When it comes to trading gold futures, the person can make the transaction on a CFTC-registered exchange. For gold ETFs, the agency tasked with regulatory oversight is the US Securities and Exchange Commission. Prediction markets are no different, Kennedy argued.
“A person who prefers to wager through a state-licensed sportsbook remains free to do so, and a person who prefers to trade a CFTC-regulated event contract on a federally registered exchange may choose that path instead,” he said in prepared remarks. “Recognising the commission’s authority over event contracts that trade on registered exchanges takes nothing away from the states’ authority over the gambling they license.”
A categorical ban?
Bean, the IGA chairman, is urging Congress to advance HR 7840, a 2026 bill titled the “Event Contract Enforcement Act”. Authored by Representatives Blake Moore and Salud Carbajal, the bill seeks to amend the Commodity Exchange Act to ban federally registered exchanges from offering sports event contracts. In a tense political climate in Washington, it is difficult to sign a bill into law. Less than 3% of standalone items in 2025 were enacted as law, according to GovTrack, a website that monitors Congressional activity.
Kennedy, who serves as co-chair of the financial markets and regulation practise at Katten Muchin Rosenman LLP, did not favour a categorical ban. Instead, he supports a tailored approach that allows the CFTC to exercise the authority given to it by Congress.
Designated Contract Markets such as Kalshi are regulated under the CEA’s core principles, according to Kennedy, who described the principles as the foundation of DCM oversight. At present, DCMs must abide by 23 core principles as a condition of obtaining and maintaining CFTC designation. Kennedy favoured a standard where the CFTC holds each contract to the core principles for maintaining customer protection and market integrity.
More hearings
Most industry insiders believe that the fight on sports event contracts will eventually head to the Supreme Court. Kennedy testified alongside Robert Schwartz, a former general counsel at the CFTC. The timing on whether the nation’s highest court will take up the case is “impossible to predict”, Schwartz suggested.
It appears that the state of New Jersey will soon petition the Supreme Court for a review of the Third Circuit’s decision in favour of Kalshi, he noted. Still, there is a possibility that another case will reach the Supreme Court first.
As it relates to market integrity, Schwartz is struck in how the issue does not break cleanly along “red and blue” lines. Since the topic stretches across the aisle, its bipartisan nature “bodes well for people who would like to see action”, Schwartz told iGB.
South Dakota Representative Dusty Johnson, the chair of the House subcommittee, vowed that this week’s hearing will not be the last on prediction markets.
“I do not believe that the committee, that Congress, should be silent,” he said. “We have an obligation to drive toward finding out what is the common ground.”
Matt Rybaltowski
Matt is primarily responsible for long-form feature coverage on complex sports betting scandals. He also provides coverage on finance, M&A and other technological developments.
Original article: https://igamingbusiness.com/prediction-markets/first-congressional-hearing-on-sports-event-contracts/
