Democrats Urge CFTC to Ban Election, Sports and War Contracts

Sen. Jeff Merkley led a group of congressional Democrats on April 30 in filing a letter with the Commodity Futures Trading Commission asking the agency to ban event contracts tied to elections, sports, military actions, war and government actions when the contracts lack an economic hedging purpose.

The filing was submitted on the final day of the CFTC’s 45-day comment period for its advance notice of proposed rulemaking on prediction markets.

Lawmakers urged the agency to prohibit broad categories of contracts they said create risks of insider trading and other harms. The letter named prediction-market platforms including Kalshi and Polymarket and argued election-linked contracts could give political insiders financial incentives to subvert voter intent. The lawmakers also said sports-event contracts represent gambling that interferes with state regulatory authority.

The Democrats wrote that prediction markets are experiencing a ‘rapid erosion of integrity’ and asked the CFTC to use its statutory authority to prevent insider trading and to bar the listed contract types when they lack a genuine hedging interest. They requested the commission adopt clear prohibitions rather than rely only on case-by-case reviews.

Sports contracts account for the largest share of volume on some exchanges. A Congressional Research Service summary shows sports accounted for about 87% of the $39.7 billion traded on Kalshi in the year ending in February and about 38% of the $36.2 billion traded on Polymarket over a similar period.

CFTC Chair Michael Selig has identified manipulation and insider trading as ‘the biggest issue that comes up’ in prediction markets. He has emphasized that exchanges serve as the first line of defense as self-regulatory organizations, and he has noted the agency can reject contracts and police fraud. He did not rule out possible restrictions on certain bet types once final rules are issued.

The April 30 letter follows a March 29 request from a similar group of lawmakers that urged the CFTC and the Office of Government Ethics to issue guidance preventing federal employees from trading on prediction markets. That earlier letter cited trades tied to a U.S. military operation that led to the capture of Venezuelan leader Nicolás Maduro. A U.S. Army sergeant, Gannon Ken Van Dyke, was later indicted in connection with those trades and pleaded not guilty.

Several bills in Congress target prediction markets. On March 26, Merkley, Sen. Elizabeth Warren and Rep. Jamie Raskin introduced the STOP Corrupt Bets Act, which would ban federally regulated event contracts on elections, sports, government actions and military moves. A bipartisan bill from Sens. Adam Schiff and John Curtis would block CFTC-registered platforms from offering sports-event contracts.

The CFTC has asserted exclusive federal jurisdiction over event contracts and has filed actions against Arizona, Connecticut and Illinois, and later New York and Wisconsin, saying those states are trying to apply state gambling laws to federally registered exchanges. The Third Circuit on April 6 affirmed an injunction barring New Jersey from enforcing its gambling laws against Kalshi’s sports-event contracts. Arizona has filed a 20-count criminal information against Kalshi’s CFTC-registered exchange; parts of that case have been temporarily stayed by the courts.

The April 30 filing arrives as the CFTC moves toward issuing final rules on prediction markets.