A Dozen Senate Democrats Ask For Prediction Market Restrictions Amid Clarity Act Negotiations

Prediction markets news roundup: What CME Group said about prediction markets during Q2 earnings; ProphetX strikes deal with Players’ Lounge.

The big news on Capitol Hill right now is the fate of the Clarity Act, which would establish a federal market-structure framework for digital assets.

The fate of that bill is tied to concerns over ethics language and other unresolved provisions. But a group of Senate Democrats is at least trying to put prediction markets into the discussion.

Twelve of them recently signed onto a letter asking for measures to rein in sports event contracts:

“We write with urgency regarding the continued lack of proper regulation over prediction markets and the resulting circumvention of state and Tribal gaming regulatory frameworks. The Digital Asset Market Clarity Act (CLARITY Act) and Digital Commodity Intermediaries Act (DCIA), as currently drafted, will only serve to exacerbate these issues by further removing regulatory accountability for decentralized finance (DeFi) betting protocols that deploy unvetted prediction and wagering markets, directly infringing on instances of Tribal gaming exclusivity and state police powers,” the senators wrote to U.S. Senate Committee on Banking, Housing, and Urban Affairs Chairman Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.); and U.S. Senate Committee on Agriculture, Nutrition, and Forestry Chairman John Boozman (R-Ark.) and Ranking Member Amy Klobuchar (D-Minn.).

The rapid expansion of sports event contracts through prediction markets and online casino-style gaming poses an existential threat to Tribal sovereignty by undermining the revenue that tribes rely on for government services such as healthcare, public safety, education, housing and social services. …

“Any further Congressional grant of exclusive CFTC jurisdiction over digital asset markets without ample guardrails for prediction market contracts will reinforce the CFTC’s claimed exclusive authority over event contracts and permanently circumvent the hard-won regulatory and economic protections established under IGRA and states’ police powers,” the senators underscored.

The senators continued, “Moreover, as currently drafted, the DCIA contains explicit exemptions from CFTC regulatory jurisdiction, and the CLARITY Act contains parallel exemptions from federal securities oversight for platform developers and non-custodial DeFi infrastructure providers that would effectively allow prediction markets to offer online casino-style gaming and sports betting across the United States, entirely bypassing the localized Tribal-state regulatory systems required by IGRA.”

The senators concluded their letter by urging the leadership of both committees to amend both the CLARITY Act and the Digital Commodity Intermediaries Act to include:

  • An IGRA and Tribal-state compacts savings clause; and

  • Prohibitions on CFTC-registered entities from listing prediction contracts that resemble sports bets or casino-style gaming products. …

Are these senators likely to get their ask in an amended bill? That’s an unlikely outcome, but the letter underscores the difficulty of getting Democrats behind Clarity. The bill is currently an underdog to become law this year at Kalshi, in part because it likely needs some Democratic support:

The bigger picture is that Clarity faces a steeper climb if it doesn’t get done in the current Congress, as Democrats are favored to take over control of the House in November (per prediction markets!).

📊 The Ticker for Tuesday, July 21

Prediction markets news roundup

🚨The important stuff

  • WHAT’S GOING ON BETWEEN FANDUEL AND CME GROUP? (Sportico): “When FanDuel and CME Group launched their joint-venture prediction market app in December, CME Group president Lynne Fitzpatrick specifically touted how the product would “enable a new generation of users to express their views” on sports, among other topics. CME didn’t express any public misgivings about sports being included in FanDuel Predicts, even though sports wasn’t part of the partnership’s initial plan shared in August. The vibes have changed dramatically, and without explanation, since then.”

    • More of what CME said about prediction markets on its Q2 earnings call, including some pointed words for the CFTC:

      • Question: “Terry, earlier this month, the CFTC stayed your 24/7 crude oil contract the day before launch, while the 24/7 gold contract went forward, and Chairman Selig was fairly pointed about the self-certification timing. What do you make of the commission drawing a line between those two products? Do you see any read-through there on how they’re maybe approaching the perpetual futures question and allowing 24/7 trading in those products potentially? Thanks.

        • CEO Terry Duffy: “I guess I don’t want to get into too much of the idiosyncrasies of some of the products they have not stayed, but it is kind of interesting how some of the 40.2 filings that have gone through the agency, and I guess I can go through an example of the ridiculous and others, but let’s just talk about the Fourth of July contract that they did not stay on a 40.2, which was Kalshi’s Nathan’s Hot Dog Eating Contest, that was actually a contract that went through, and I guess that had an economic interest to somebody. I’m not sure who, but 24/7 needed to be stayed on this existing contract. That to me is a little concerning about readily manipulable, susceptible to manipulation under Core Principle 3, which we have been very adamant about, of these contracts….

        • “We also have prediction markets that have prices of oil that trade 24/7. I was a little surprised by that, but I guess I shouldn’t be because there’s certain other contracts that take priority when you’re in the hot dog business. There’s a lot of things going on right now, Patrick, I’m surprised by it, and I’m not trying to be too flippant about it, but I am trying to point out that we are trying to run contracts here that are meaningful for commerce, that we think are critical for commerce. There are other participants that are listening to this, and we are being held up by the agency, but they are not telling us or the world how they are policing U.S. participants from not participating in 24/7 oil today, or how they can square up that predictions on oil prices for down the road that trade 24/7 are any different from our small contract.”

      • Question: “Just a question on prediction markets. I was hoping you could update us on the traction that you’re seeing, particularly outside of sports, and if you could talk to some of the steps that you’re taking to drive greater engagement and connectivity, what’s on the product roadmap, and more broadly, can you speak to the market data opportunity ahead with prediction markets?”

        • Duffy: …Prediction markets, interesting. There seems to be a lot of activity. I want to ask Lynne to talk a little bit about how the revenue kicks out on top of those and the way they are structured. We’ll try to keep the sports out of it because I’ve been pretty public about this. A lot of these prediction markets on sports are gambling, and I think that that is going to find its way to the Supreme Court, and that is not something that we want to be a part of participating in right now. As I said earlier, I think a lot of these contracts are susceptible to manipulation when they list some of these small parlays and things of that nature, and those are not markets. Those are gambling. We’ll talk more about the predictions on economic outcomes and things of that nature and give you some stats on how we’ve broken some of those out, and we can give you those.

        • Lynne Fitzpatrick, CFO: Thanks, Mike, for the question. A couple of points there. If you look since launch, we’ve done about 525 million event contracts. That includes about 48 million contracts related to market events, about 9% of the total. That does tend to fluctuate depending on what is going on in the markets themselves. Things like large events like the World Cup, you tend to see a bit of a shift. As Terry mentioned, our product set is much more narrow than some of what you might see on some of these other platforms, and that is intentional because we want to be very careful with what we are putting out for trade to make sure that it meets all the requirements that we see from our regulator.

        • A couple other points I would note. We had over 140,000 accounts that were trading event contracts this quarter. That was up about 13% from last quarter. We also saw some good growth in the average daily volume traded. We are up over 4 million a day. That was up about 40% versus what we saw in Q1. I can let Tim add a little bit more there. I guess one thing before I do, the market data question, I think that’s still a bit of a ways off in terms of monetizing anything related to these markets, given the level of volume. We’d want to see that really have a lot more seasoning before we would start talking about that.

        • Tim McCourt: “I think just maybe one thing to add is, as we continue to see sort of consecutive months of growth in our ADV in the totality of the complex, that we are also pleased to see when we are seeing some of these major events happening, like the World Cup that Lynne mentioned, that on some of those days, we are seeing our markets volume participate alongside upwards of 20% of the volume that we’re seeing. It just reinforces this hypothesis of getting these traders into our market and continuing to work to attract the next generation of traders. We’re pleased to see that we’re seeing balanced growth, both in terms of the markets as well as the sports. We’re very pleased with the progress we’ve made.”

  • ProphetX and Players’ Lounge Partner to Launch CFTC-Regulated Sports Prediction Markets to the Next Generation of Competitive Gamers (press release): ProphetX, a CFTC-designated contract market (DCM) and derivatives clearing organization (DCO) built for sports prediction markets, and Players’ Lounge, the leading skill-based gaming platform where millions of gamers compete for real money on Madden NFL, NBA 2K, Call of Duty, Fortnite, and more, today announced a strategic partnership launching federally regulated sports prediction markets within the Players’ Lounge ecosystem.

    • Under the agreement, Players’ Lounge has integrated ProphetX’s prediction market exchange, enabling its community of competitive gamers and sports fans to trade event contracts on real-world sports outcomes — from NFL game results and NBA player props to tournament brackets and championship futures. The markets are currently available through the Players’ Lounge platform and powered entirely by ProphetX’s CFTC-regulated infrastructure. …

    • “Players’ Lounge has built something genuinely rare: a platform where a new generation of sports fans already shows up, competes, and has real money on the line. That community deserves access to the most competitive, transparent markets on the planet — and that’s exactly what ProphetX provides. This isn’t sports betting dressed up in new clothes. It’s a federal exchange where the crowd sets the price and every participant is on a level playing field.” — Jake Benzaquen, Co-Founder and Chief Commercial Officer, ProphetX

  • What we know about the typical Polymarket user (Pew Research): “The typical (median) Polymarket user placed a total of 46 trades across 10 active trading days during our study period. The value of the average trade was $6.50. However, there’s a lot of variation in trading activity on Polymarket. About a quarter of the accounts we analyzed (24%) placed fewer than 10 trades. On the other end of the spectrum, 11% of accounts placed 1,000 trades or more in just six weeks.”

⚖️ Legal and regulatory news

  • Prediction Markets Put State Gambling Laws to the Test (National Conference of State Legislatures): “As federally regulated event contracts expand, lawmakers are weighing where financial markets end and gambling laws begin. Prediction markets—online exchanges where users buy and sell contracts tied to future events—are moving quickly from niche financial products into the middle of a familiar state policy fight: Is this regulated trading, or is it gambling? In this installment of “State of Play,” a bipartisan video series created by A Starting Point and NCSL, state lawmakers discuss the topic.”

  • Treat prediction markets as gambling, lottery associations urge (SBC Americas): “In a public statement issued Tuesday, the North American Association of State and Provincial Lotteries (NASPL) described prediction markets as a new type of gambling that attempts to “conceal its true identity” and makes ‘a surreptitious effort to undo established policy by blurring functional distinctions.’”

    • “NASPL referred heavily to a World Lottery Association (WLA) position paper titled “Prediction Markets: Unlicensed Betting by Another Name – Threats to Sports Integrity, Consumer Protection, and the Lottery and Betting Sector”. That paper argues that it is time for prediction markets to be regulated as if they were state-approved gaming products, regardless of the label that operators or the Commodity Futures Trading Commission (CFTC) use for them.”

  • Kalshi Leads Push in Prediction Markets to Bolster Legal Talent (Bloomberg Law): “Regulatory pressures swirling around the predictions market are driving key players to shore up their legal firepower. Kalshi Inc. is the latest to react, bolstering its small but growing in-house legal team this month by hiring Jovalin “Jovy” Dedaj, most recently an associate general counsel at Interactive Brokers LLC, as head of litigation. In addition to Kalshi, Blockratize Inc.‘s Polymarket; Stake Trade Inc.’s ProphetX; NoVig Betting Inc.; Underdog Sports Holdings Inc.; and OG.com, a subsidiary of Crypto.com owner Foris Dax Inc., have all named new legal leaders since last year.”

  • Polymarket intends to challenge France’s decision to block its website (Reuters): “We are disappointed by the French gaming authority’s (ANJ’s) sudden decision to unilaterally block ​our website -- we intend to ​challenge this decision through the legal process in ‌France,” ⁠Polymarket said in a statement.

    • 🤔 Maybe Polymarket has a case, but I’ll make France the favorite of winning if this actually does go to court.

  • A follow-up on Wisconsin and election betting:

📣 Industry news

  • Coinbase Wants to Be Canada’s One-Stop Shop for Stocks, Crypto and Prediction Markets (Decrypt): “Eric Richmond, CEO of Coinbase Canada, told BNN Bloomberg this week that the company is pushing its “Everything Exchange” north of the border—a single platform where crypto, stocks, ETFs (funds that track a basket of assets like the S&P 500), and prediction markets (platforms where users bet real money on the outcome of real-world events, like elections or sports results) all trade from one account.”

📖 Everything else you should know/read

  • How Prediction Markets Are Shaping Real-World Events and Eroding Public Trust (Roosevelt Institute): “Indeed, the many incidents of insider trading on prediction markets covered by the media should be concerning not only because they are unfair to the participants who lose money, but because those insiders could very well use their access to alter real-world events, with much greater consequences than a baseball game. As people’s faith in our society’s institutions has dropped in recent years, prediction markets threaten to accelerate that trend.”

  • How did AI bots do betting on the World Cup at Polymarket? (Twitter): The World Cup ended last night. And with it, an experiment I’d been following for 39 days: seven AIs unleashed on Polymarket’s prediction markets, $10,000 in fictional funds each, across all 104 matches of the tournament.

    • GPT-5.5, Claude Opus, Gemini, Grok, DeepSeek, Mistral, Kimi. Before every kickoff, each one conducts its own web research, reads the odds, picks its positions, all in total autonomy. The tally: 731 analyses, nearly 4,000 web searches, 1,370 bets, $660,000 in fictional funds wagered.

    • I expected variance to devour everything. In the end, five out of seven accounts finish above their starting capital, +21.7% cumulatively. Podium: Gemini 3.5 Flash +55%, Mistral Medium +55%, GPT-5.5 +48%.

  • Prediction Markets and the Public Interest (Council on Foreign Relations):

  • Blame California And Texas For The Prediction Market Gold Rush (InGame): “Let’s start with what the prediction markets are actually doing. EKG’s numbers suggest they aren’t so much eating the sportsbooks’ lunch as they are creating a whole new meal. In addition to the 43% number, a full 69% of all sports contract volume comes from the 19 states without legal online sports betting. In the mature, competitive states, Kalshi’s share of handle tops out around 2%.”

  • How a Kalshi executive is pitching Wall Street on prediction markets (Business Insider): “Yesterday afternoon, I spoke with Andy Ross, Kalshi’s head of institutional, about the platform’s push to get institutional investors on board. The 40-minute conversation covered how Ross is trying to woo bigger players onto the platform, the impact it can have on their businesses, and how he navigates concerns about prediction markets. I think it’s worth a watch, but I’m biased.

⏱️ Day 18 of asking for more than one CFTC commissioner

  • This is day 18 of me asking the Trump administration to appoint more commissioners and at least one Democrat: