Democratic sweep puts prediction markets in Congress’s sights

Democrats’ sweeping midterm victories have raised the prospect of a more aggressive congressional examination of prediction-market platforms, after Kalshi and Polymarket correctly anticipated the results before much of the pundit class.

The expected scrutiny would follow two years in which Donald Trump’s regulators embraced the sector, clearing the way for a rapid expansion of contracts tied to politics, sports and stocks. Politico reported that Democrats were preparing an oversight regime likely to put the industry under intense pressure in Congress.

Sen. Jeff Merkley has called for legislative limits on what he characterises as prediction-market gambling. “Folks are rightfully concerned about dangerous bets on elections, war, assassinations, terrorism, and government actions that go against the public interest,” he said, adding that Democratic control of Congress created an opening for “long-overdue legislative action.”

Merkley had already criticised the Commodity Futures Trading Commission’s proposed rule on event contracts as inadequate. In June, the agency proposed criteria for deciding when contracts could not be listed or cleared by registered entities, including a definition of “gaming” and a standard for when a contract involves an underlying activity. The Federal Register notice said the proposal had attracted 1,459 comments through Regulations.gov.

The senator said the proposal would still allow contracts tied to elections, military actions and government actions, including U.S. military rescue missions. He has written the STOP Corrupt Bets Act, which would ban contracts he regards as contrary to the public interest and lacking economic value, and the End Prediction Market Corruption Act, which would bar public officials from trading event contracts.

Congress has so far taken little action either to support or restrain the industry. CNBC reported in October that nearly 30 prediction-market bills had been introduced since 2025, mostly by House Democrats, but none had passed. The measures largely sought to restrict members of Congress and staff from using the platforms or prohibit certain contracts, particularly sports-related offerings.

As reported last month, Sens. John Curtis and Elizabeth Warren asked Kalshi and Polymarket to explain their safeguards against insider trading, manipulation and other misconduct in election markets.

The potential inquiry could extend to the CFTC, whose ability to supervise a rapidly growing sector after staffing cuts has been questioned by lawmakers. The agency has said its experience regulating other markets showed it could handle event contracts, and pointed to its oversight of nearly $600 trillion in notional value across U.S. derivatives markets, compared with less than $1 trillion in prediction markets.

Kalshi and Polymarket have said they welcome engagement with Congress. Kalshi has backed rules on insider trading, consumer protection and permissible contract types, while Polymarket said public scrutiny was useful because the mechanics of prediction markets remained unfamiliar to many people. A former Democratic Senate general counsel told CNBC that policymakers wanted investigations but still lacked a broad understanding of the sector, with sports contracts likely to be the easiest point of entry.

The CFTC has said event contracts can offer economically useful information and constitute responsible financial innovation. Trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025, according to the agency’s June notice. The agency was on track to hire about 100 employees in critical areas by the end of 2026.