Senate Bill Targets Prediction Markets As Kalshi Tightens Integrity Rules
Prediction markets are facing mounting political pressure in Washington, and at the same time, operators are scrambling to prove they can police themselves. Monday, both paths converged as a bill to ban sports trading on prediction markets was introduced in the U.S. Senate, and Kalshi tightened and formalized its rules against insider trading. And among those involved in professional sports, being able to trade on the site.
A bipartisan group of U.S. senators introduced legislation that would ban federally regulated prediction markets from offering trades on sports and casino-style events — a direct shot at a fast-growing sector that has blurred the line between derivatives trading and traditional sports betting.
Just hours later, Kalshi moved to strengthen its own guardrails, announcing new restrictions aimed at preventing insider trading and conflicts of interest across its platform.
Kalshi's integrity partnership with IC360 could be a harbinger, as the company lists the NBA and NFL as its clients. Both of those leagues remain publicly opposed to any dealings with prediction markets, partly due to integrity concerns. Last week, Polymarket entered into a marketing agreement with MLB. On the same day, MLB and the Commodity Futures Trading Commission (CFTC) entered into a "Memorandum of Understanding."
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Bipartisan Push To Ban Sports Event Contracts
U.S. Sen. Adam Schiff (D-Calif.) and Sen. John Curtis (R-Utah) unveiled the “Prediction Markets Are Gambling Act,” which would prohibit exchanges regulated by the CFTC from offering contracts tied to sporting events or casino outcomes.
The bill represents the clearest federal attempt yet to draw a hard boundary between prediction markets and state-regulated gambling.
Supporters argue that allowing nationwide access to sports-related event contracts — often available in all 50 states — effectively creates a parallel betting ecosystem that bypasses state licensing, taxation, and consumer protections.
The legislation lands as tensions escalate between federal regulators and state officials. Several states have already challenged prediction market platforms, arguing they are offering unlicensed sports betting under the guise of financial products.
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Kalshi Moves To Get Ahead Of Integrity Concerns
Against that backdrop, Kalshi is attempting to show regulators — and critics — that it can operate with sportsbook-level integrity controls.
The company plans to block professional and collegiate athletes, coaches, and team personnel from trading on markets tied to their sports. It will also prevent political candidates from trading on markets involving their own campaigns.
While Kalshi’s rules already prohibited those activities, the update adds a preventative layer — stopping those users from placing trades in the first place rather than relying solely on enforcement after the fact.
The move comes amid increasing scrutiny over insider trading risks in prediction markets, particularly as liquidity and participation have grown.
Kalshi has previously said it has opened roughly 200 integrity investigations over the past year, with more than a dozen escalating into formal cases — signaling both increased oversight and greater risk as the market expands.
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Industry-Wide Crackdown On Insider Trading
Kalshi is not alone in tightening controls.
Rival platform Polymarket also announced enhanced integrity rules, including explicit bans on trading using stolen confidential information or “illegal tips,” as well as restrictions on participants who can directly influence event outcomes.
Together, the moves reflect a broader shift across the industry: prediction markets are being forced to adopt safeguards that more closely resemble those used by regulated sportsbooks.
That pressure has intensified following a string of betting-related scandals across professional and college sports, including cases involving MLB pitchers, NBA players, and NCAA athletes accused of manipulating outcomes or sharing inside information.
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Federal vs. State Fight Intensifies
The timing of both the legislation and Kalshi’s policy changes underscores a growing regulatory clash.
CFTC Chairman Mike Selig has signaled that prediction markets fall under the agency’s exclusive federal jurisdiction as derivatives products — a stance the commission reinforced in recent legal filings.
States, however, are increasingly pushing back.
Arizona’s attorney general recently filed criminal charges against Kalshi, alleging the company is operating an unlicensed sports betting business. Other states have explored similar actions or restrictions.
Friday, a federal judge entered a temporary restraining order against Kalshi in Nevada that shutters the platform in that state for 14 days.
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What Comes Next?
At the core of the dispute is a fundamental question: Are prediction markets financial instruments — or gambling products?
The proposed Senate bill suggests that at least some lawmakers are leaning toward the latter — and are willing to act to shut down sports-related contracts entirely. The Senate bill faces near-impossible odds of becoming law on its own. It's unlikely to get 60 votes in the Senate. And would likely be vetoed by President Trump, whose son, Don Jr., serves as an advisor to both Kalshi and Polymarket.
For operators like Kalshi, the response has been to double down on compliance and integrity in hopes of preserving their broader business model.
But the two developments, arriving on the same day, highlight the reality facing the industry: self-regulation alone may not be enough to satisfy policymakers.
As prediction markets continue to expand into sports — one of the most heavily regulated betting sectors in the U.S. — the pressure to define where trading ends, and gambling begins is only intensifying.
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