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(AsiaGameHub) –   Lawmakers warn that the fast-growing prediction markets industry is starting to resemble unregulated sports betting, as a nascent fight for the future of prediction markets in the United States intensifies.

Senator Adam Schiff Raises Concerns Over Sports Contracts on Prediction Platforms

Democratic US Senator Adam Schiff noted that venues offering event-based contracts have moved away from their original financial purpose. He said the line between speculative trading and gambling has become increasingly difficult to distinguish in a policy discussion in Washington, particularly when contracts are tied to sports outcomes, according to Covers.

Current oversight mechanisms are not equipped to handle the rapid growth of these markets, Schiff said. He cited staffing shortages and reduced enforcement capacity at the federal agency responsible for overseeing such platforms, the Commodity Futures Trading Commission (CFTC). The regulator lacks both the necessary staff and technical infrastructure to monitor increasingly complex trading activity, he explained.

The senator also framed the issue in terms of states’ rights. He warned that federally regulated sites could effectively circumvent local laws where sports betting remains illegal. That, he said, poses a threat to undermine the authority of states and the governing structures of tribes that have traditionally regulated gambling activities.

US Senate Proposal Seeks to Separate Financial Hedging From Gambling-Like Markets

To address those concerns, Republican Sen. John Curtis and others have introduced a bipartisan bill. The legislation would ban prediction markets on sporting events and other activities similar to casinos, but would allow contracts with a legitimate economic purpose, such as hedging against commodity prices or weather conditions.

Supporters of the bill argue that many of these platforms serve as a workaround to existing gambling regulations. They also express concerns regarding accessibility, noting that users may be able to participate at a younger age than what is permitted in traditional betting environments. Lawmakers have also referenced data indicating that a small group of highly sophisticated participants capture most of the profits, leaving casual users at a significant disadvantage.

However, industry representatives strongly reject these claims. Executives from regulated exchanges like Kalshi assert that their platforms are transparent and operate under federal oversight, and should therefore not be classified similarly to a casino. They highlight the potential of prediction markets as valuable tools for managing real-world uncertainty, ranging from weather disruptions to economic fluctuations.

The debate is unfolding amid ongoing legal battles in several states, where courts are being asked to determine whether these contracts fall under federal commodities law or state gambling regulations. The outcome of these cases could ultimately shape the regulatory landscape across the nation.

As prediction markets grow increasingly interconnected with technologies such as cryptocurrency and algorithmic trading, policymakers face mounting pressure to clarify the legal status of prediction markets.

Schiff has not advocated for a complete ban but has emphasized that the ability to differentiate between beneficial financial instruments and speculative betting will be crucial to any future regulation.