Prediction Markets: Democrats eye tighter rules after House win

Nearly 30 bills related to prediction markets have been introduced in Congress since 2025. Most of these measures were sponsored by House Democrats. They would generally bar lawmakers and their staff from trading on platforms like Kalshi and Polymarket. None of the proposals have passed yet. Polls indicate Democrats are on track to take control of the House next month.

The shift in power could change the status quo. Hakeem Jeffries, the Democratic leader in the House, would oversee a chamber where these bills have strong support. Committee investigators may also examine the role of Donald Trump Jr. as an adviser to both Kalshi and Polymarket. Some members on both sides of the aisle fear his ties helped the companies secure favorable rulings from the administration. Trump Jr.'s venture capital firm, 1789 Capital, also invested in Polymarket.

A spokesperson for Trump Jr. said he does not sit on the investment decision-making committee for 1789 Capital. The company stated his advisory role is separate from its investments. Another spokesperson called the concerns politically motivated, noting Trump Jr. never deals with the federal government on behalf of companies he advises. Kalshi CEO Tarek Mansour acknowledged the connection creates an optics issue but said it has never been used to gain favor. Sen. John Curtis of Utah has separately called for a probe into Trump Jr.'s interests.

The platforms also have strong Democratic connections. Stephanie Cutter, a former Obama staffer, serves as a senior policy adviser at Kalshi. Polymarket hired Rob Eskridge, a former chief of staff to a Democratic congressman, in September to lead government relations. Both companies say they welcome engagement from lawmakers. A Polymarket spokesperson said, "We welcome scrutiny." Kalshi supports frameworks on insider trading and consumer protection.

Sean Patrick Maloney, who leads the Coalition for Prediction Markets, cautioned his party against overreach. Speaking at a New York conference this month, he warned that pushing the industry offshore would move activity to platforms with weaker protections against manipulation. The Commodity Futures Trading Commission, or CFTC, could also face pressure. Some lawmakers doubt the agency can oversee the sector after staffing cuts in 2025. The Government Accountability Office accepted a request from Sen. Elizabeth Warren in July to review the agency's workforce reduction.

Warren is expected to chair the Senate Banking Committee if Democrats win that chamber. She plans to expand oversight of the CFTC. CFTC spokesperson Zach Fulton rejected the criticism of the agency's capacity. He noted the commission regulates nearly $600 trillion in notional value, while prediction markets are worth less than $1 trillion. Fulton said the agency is on track to hire about 100 employees in critical areas by the end of 2026. The CFTC has recently sought public comment on vertical integration and warned exchanges about manipulation risks in mention markets.

The agency continues to defend the platforms against state arguments that their sports offerings are gambling. It also keeps approving new products. David Aron, a former CFTC employee, said committees in a Democratic-led chamber would be a little sharper. He added that the experience will not be fun. CNBC, the original publisher, disclosed a commercial relationship with Kalshi.