Prediction Markets Face a Tougher Congress as Democrats Plan Oversight Push

Prediction markets spent much of 2026 expanding with support from federal regulators.

In January, they face a Congress increasingly interested in investigating and restricting the business.

Democrats’ midterm victories give longtime critics more influence over hearings, document requests and legislation. Sen. Elizabeth Warren is expected to chair the Senate Banking Committee, and an aide says ending the prediction market industry’s “Wild West-style” lack of oversight is among her priorities, according to CNBC.

The pressure is already building. Rep. Ro Khanna called Tuesday for Congress to ban sports prediction markets, describing them as “sports betting disguised as financial trading.” Sen. Adam Schiff has sharply criticized the Commodity Futures Trading Commission’s recent geographic-access interpretation and already introduced bipartisan legislation to prohibit sports and casino-style contracts.

Committee leadership assignments are not all finalized, bills still need to pass and President Donald Trump remains in the White House, but the platforms’ Washington risk is changing quickly, and regulatory support will now coexist with a much more aggressive congressional opposition.

Warren’s agenda starts with insider trading and conflicts

Warren’s planned oversight is not simply an objection to people betting on elections.

Her office is focusing on whether insiders can profit from information ordinary customers cannot access, how platforms police manipulation and whether political relationships interfere with independent regulation.

Those questions are already generating requests for records.

On October 28, Warren and Republican Sen. John Curtis wrote to Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan asking about safeguards against improper election trading. Their inquiry addressed access by candidates, campaign staff and others holding material nonpublic information, with responses requested by Election Day.

“The identification of isolated instances of improper trading does not demonstrate that these markets are adequately protected,” the senators wrote. “Instead, it raises serious questions about how much similar activity may be going undetected.”

That bipartisan involvement matters. Democrats will control the congressional agenda, but criticism of these markets is not confined to Democrats.

A White House betting case supplies an immediate test

Warren and Sen. Jeff Merkley are also pressing White House counsel Will Scharf about safeguards against staff using confidential information to trade.

The letter follows the case of Gabriel Perez, Trump’s former teleprompter operator, who allegedly used advance knowledge of presidential speeches to profit on Kalshi’s word-mention contracts. Perez subsequently settled CFTC charges, agreeing to surrender profits, pay a penalty and accept a three-year trading ban, according to Fortune.

“It has been four months since this White House insider trading scandal came to light,” the senators wrote, asking what further steps the administration was taking to prevent abuses.

They requested information on staff training, communications with enforcement agencies and a memo warning employees against improper trading. Answers are due Nov. 23.

The senators also raised potential conflicts involving Trump-family relationships with prediction market companies. Donald Trump Jr. advises Kalshi and Polymarket, while investment firm 1789 Capital, where he is a partner, has invested in Polymarket.

Khanna and Schiff want to restrict the products themselves

The oversight agenda extends beyond stronger surveillance of otherwise permitted markets.

Khanna’s call to ban sports prediction contracts challenges a major category of the business.

Schiff and Curtis already introduced the Prediction Markets Are Gambling Act in March. It would prohibit CFTC-registered entities from listing contracts involving sporting events and casino-style games.

Schiff has separately proposed the DEATH BETS Act, intended to expressly prohibit contracts involving or referencing terrorism, assassination, war or an individual’s death. He also joined bipartisan legislation aimed at preventing government officials and employees from using inside information on prediction markets.

Those proposals address different questions:

• Which products should be available at all?
• Who should be allowed to trade them?
• What information should participants be prohibited from using?
• Which regulator, or government, should enforce the restrictions?

The CFTC’s geofencing policy has become a political flashpoint

Schiff’s latest criticism targets the federal regulator’s effort to preserve nationwide market access.

The CFTC recently gave designated contract markets 30 days to cease domestic geographic restrictions that violate impartial-access requirements or explain why compliance is not feasible. The interpretation also addresses restrictions imposed through intermediaries. It does not itself vacate existing court orders.

Schiff described it much more sharply in a Nov. 6 statement.

“Sports prediction markets are sports bets,” he said. “By effectively requiring prediction markets to offer contracts in all 50 states, even on Tribal lands, the CFTC is once again violating state law and Tribal sovereignty.”

He accused the agency of encouraging conduct inconsistent with court restrictions and said CFTC Chairman Michael Selig had been “captured by the industry.”

The agency’s position is that geographic exclusions can conflict with the national structure Congress established for regulated derivatives exchanges. Its interpretation includes a process for explaining restrictions that cannot feasibly be removed.

That disagreement offers an obvious subject for congressional questioning: How the CFTC reconciles its access policy with injunctions, state enforcement and tribal gaming law.

What a Democratic Congress can realistically do

The first effects are more likely to be investigative than an immediate rewrite of the law.

Warren’s prospective Banking chairmanship gives her a prominent investigative platform, but the CFTC’s principal congressional oversight lies with the Agriculture committees, not Senate Banking. Schiff serves on Senate Agriculture, and House Agriculture’s jurisdiction includes commodity exchanges and CFTC oversight.

House Financial Services could provide another source of pressure. Rep. Maxine Waters, who is seeking its chairmanship, has pledged to target “predatory platforms, including prediction markets.”

The result could be scrutiny from several committees rather than one centralized prediction markets investigation.

Courts remain another front, not a substitute for legislation

The congressional shift arrives while courts continue to disagree over the reach of state gambling law.

The Third Circuit Court of Appeals ruled for Kalshi in New Jersey, while the Ninth Circuit ruled against it in Nevada and denied rehearing Nov. 4. Other appeals and U.S. Supreme Court petitions remain pending. As DeFi Rate’s litigation tracker documents, the Supreme Court has not agreed to resolve the dispute.

Congressional action and that litigation follow different routes. Courts interpret existing law; lawmakers can investigate how it is administered and propose changing it.

Even a favorable jurisdictional ruling would not automatically answer every question about insider trading, market surveillance, advertising or conflicts of interest.

Expansion now comes with a larger oversight bill

The industry is not entering this period without federal rules or enforcement. The CFTC regulates registered exchanges and has brought cases involving improper trading, including the Perez settlement. Calling the sector a “Wild West” is critics’ characterization, not an absence of regulation.

The question is whether existing safeguards and the agency’s approach are sufficient.

Merkley put the incoming majority’s position plainly.

“We need to rein in this gambling, and with Democrats taking back control of Congress, now is the time for long-overdue legislative action,” he said.

For operators, the immediate change is oversight. They may continue expanding products and contesting state restrictions while preparing to explain their surveillance systems, political relationships and business models to congressional committees.

A new majority does not guarantee a ban. It does make the expectation of an uninterrupted, regulator-supported expansion much harder to sustain.