Opposition to prediction markets is gathering pace in Congress, with another bill set to be introduced Thursday that would impose a sweeping ban.
Why it matters: Prediction markets now offer the chance to risk money on sports, politics, news and entertainment throughout the country — but critics say it is gambling and is rife with insider trading.
Driving the news: Sen. Jeff Merkley (D-Ore.) is introducing the STOP Corrupt Bets Act on Thursday, while Rep. Jamie Raskin (D-Maryland) is introducing the House version of the bill.
- It would ban event contracts on elections, sports, government actions and military moves.
- "When anyone can use prediction markets to make a well-timed bet on Congress passing a bill, government decisions or a military strike, it's ripe for corruption and erodes public trust," Merkley tells Axios.
Between the lines: The Merkley bill, which is co-sponsored by Sen. Elizabeth Warren (D-Mass.), would go further than a bipartisan bill introduced earlier this week by Sen. Adam Schiff (D-Calif.) and Sen. John Curtis (R-Utah).
- The Schiff-Curtis legislation would ban "any prediction contract that resembles a sports bet or casino-style game."
- Another bill introduced Wednesday by Rep. Adrian Smith (R-Neb.) and Rep. Nikki Budzinski (D-Ill.) — the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act — would ban senior government officials from insider trading on prediction markets.
The other side: Advocates say that prediction markets are properly regulated by the Commodity Futures Trading Commission and don't agree with the premise that they are tantamount to gambling.
- "Banning sports on regulated prediction markets would just push this behavior offshore, where no regulation exists," Elisabeth Diana, a spokesperson for prediction market Kalshi, said in a statement this week.
- She said prediction markets "offer a fairer choice to consumers" than sportsbooks, adding that "we should let competition run its course instead of protecting monopolies."
Zoom in: The Merkley bill would explicitly note that Congress never intended to legalize prediction markets on issues like sports and politics via the Commodity Exchange Act of 1936.
- It would also require the Government Accountability Office to study prediction markets, insider trading issues and the effects on children.
- "The STOP Corrupt Bets Act restores the original intent of prediction markets and prevents these markets from further eroding our democratic institutions and turning them into a casino," Merkley said.
The intrigue: Prediction markets have been taking proactive steps in recent weeks to show they're responsible actors.
- Kalshi said this week that it will preemptively block athletes and politicians from betting on their markets.
- And Polymarket announced "enhanced market integrity rules" banning trading on stolen confidential information or "illegal tips" and "trading by those who can influence the outcome" of an event.
Reality check: Any prediction market legislation would need to be signed by President Trump — and his appointed CFTC chairman has signaled support for budding prediction markets.