The rise of predictive markets has presented a dilemma for Washington, as lawmakers are still learning how these trading platforms operate, while Congress has hardly taken any measures to support or regulate these companies. However, mid-term elections could bring about change. As part of the Democratic Party's broader agenda for greater oversight, these platforms and their regulatory agencies may face more stringent scrutiny.
At present, predicting the market seems to be a non-partisan issue, with supporters and opponents from both the left and right factions.
Since 2025, both chambers of Congress have proposed nearly 30 bills related to predictive markets, most of which were introduced by Democrats and primarily came from the House of Representatives. These proposals focus on prohibiting or restricting members of Congress and their staff from participating in these platforms, as well as banning certain types of contracts, mainly those related to sports.
None of these bills were passed.
Polls show that the Democrats are expected to take control of the House next month, and these bills, along with supporters who hope to reform the industry, may have a better chance of being advanced under the leadership of Democratic Leader Hakim Jeffries.
Even without legislation, Democrats could leverage the committee's investigative powers to question Donald Trump Jr., son of U.S. President Donald Trump, Jr, as well as his role as consultant for leading companies Kalshi and Polymarket. Many Democrats, and even some Republicans, are concerned that this role could be used to secure favorable regulatory rulings for the Trump administration.
Relevant regulatory agencies – the US Commodity Futures Trading Commission (CFTC) – may also face greater scrutiny. Some members of Congress are concerned about whether the agency has the capability to regulate the rapidly growing predictive market industry after recent layoffs.
However, CFTC raises objections to this and tells CNBC that its experience in other markets proves its capability to regulate emerging event contracts. At the same time, both leading platforms state that they are open to communicating with legislators and also welcome potential legislation that may emerge as the industry develops.
Polymarket A spokesperson said in a statement: "We welcome scrutiny. For most people, we are still a new concept, and our biggest issue is often the lack of understanding about how our platform operates... We hope to work with legislators and staff to ensure that the full potential and value of the predictive market can be unleashed, while also ensuring that regulation matches the vast demand and scope of this product."
Why might the Democratic Party target these platforms?
Although both parties have expressed concerns about the predictive market, what is more likely to trigger partisan disputes is Trump's role as advisor to Kalshi and Polymarket.
His venture capital firm, 1789 Capital, also holds investments in the latter company. However, a spokesperson for that firm told CNBC that Trump Jr is not part of the company's investment decision-making committee and therefore "has no authority to allocate capital to the company." The spokesperson added that Trump Jr's advisory role in Polymarket is separate from the company's investment activities.
As these leading predictive market companies continue to grow, they have been seeking CFTC to make favorable rulings regarding new products and ongoing rule-making. Some legislators are concerned about how Trump's Jr role will affect these decisions.
Former CFTC trial lawyer Joseph Konieczkowski said, "I know that the appearance of conflicts of interest is serious enough for a Republican senator to call for an investigation into Don Trump's Jr. Especially his interests in polymarket and culture." He was referring to a letter from Utah Republican Senator John Curtis, who is skeptical about market forecasts. "So when you see a Republican senator making such a public call, I think that indicates a serious problem."
If the Democratic Party regains control of the House of Representatives, Representative Robert Garcia's office will take over as the chair of the House Oversight and Government Reform Committee, but the office has not responded to requests for comment.
A spokesman for Trump's son said that concerns about his relationship and role with these platforms are politically motivated.
In the statement, the spokesperson said: 'Democrats are obsessed with harassing him because of his surname Tang, despite there being no evidence to suggest that he has engaged in any improper behavior. Tang has never dealt with the federal government on behalf of any company he has advised or invested in.'
A person familiar with the operations of Polymarket stated that investors and advisors like Trump Jr provide commercial and strategic advice. The same person added that the internal management and legal teams of Polymarket are responsible for supervising compliance obligations.
Kalshi and Polymarket are also connected to Democrats. Stephanie Carter, a staff member of former President Barack Obama, is a senior policy advisor for Kalshi, while Polymarket hired Rob Eschrich, the former chief of staff for Democratic members of Congress, in September to oversee its government relations team.
Kalshi Chief Executive Officer Tarek Mansour stated last week at MS NOW that Trump's Jr would bring "image issues" to the company, but added that the company has never used such relationships to gain favor with the U.S. government.
In the past nine months, Kalshi has communicated multiple times with lawmakers regarding Trump's Jr role within the company, assuring them that the president's son is only responsible for providing marketing advice, according to the platform. The company also stated that as lawmakers increasingly become aware of market forecasting, there has been bipartisan progress in Congress's view of this industry, and emphasized that federal-regulated exchanges have advantages over those based overseas.
Members of parliament are still learning about predicting markets, as this field is quite new, so it is still unclear what specific actions they will take.
A Democratic official who declined to be named and who once served as the chief legal counsel for a U.S. senator said, "They want to conduct some investigations into this matter. I think they don't seem to have a broad understanding of what this implies yet." The official stated that sports contracts are an easier entry point for legislators to address, as they can be compared to sports betting.
Kalshi A spokesperson stated that the company welcomes the establishment of a legislative framework to address concerns regarding insider trading, to establish consumer protection, and to clarify the standards for which types of contracts are allowed.
The spokesperson said, "Congress has both the opportunity and, we believe, the willingness to do this right. By establishing smart safeguards now, we can ensure that this industry grows responsibly within the United States, while also preventing abuses that occur overseas in areas beyond the reach of U.S. regulators."
Former Democratic Congressman and current head of the Predictive Markets Alliance, Sean Patrick Maloney, warns his own party not to overreact to this industry.
At a conference in New York City this month, he said, “Why push your business to overseas platforms that do not have the same security measures you have here?” He added that Democrats tend to focus too much on opposing something simply because it “has a Trump connection,” which he considered short-sighted.
CFTC becomes the focus
Democrats and some Republicans express doubts about the ability of CFTC to regulate these new markets, due to concerns regarding the exchange's sports-related products, as well as fears that the institution may face layoffs in 2025.
According to a letter first reported by NPR, the U.S. Government Accountability Office (GAO) accepted a request from Senator Elizabeth Warren in July to review the committee's layoffs.
If the Democratic Party wins control of the U.S. Senate, Warren is likely to become the chairperson of the Senate Banking Committee. She has always been skeptical about market forecasts, while there is widespread expectation that she will use this committee to increase oversight over the industry regulator CFTC.
A representative from Warren's office declined a request for comment.
CFTC Spokesperson Zach Fullton refuted external criticisms that the institution is unable to regulate event contracts. He stated in a statement, "The CFTC currently regulates derivatives markets in the United States with a notional value of nearly $600 trillion. The commission is fully capable of regulating prediction markets with a notional value of less than $1 trillion." Fullton also pointed out that by the end of 2026, the CFTC is expected to hire about 100 employees in "key areas."
In recent years, CFTC has also increased its regulatory efforts in this field.
For example, in July, the commission announced that it was seeking public feedback on proposed rules regarding vertical integration within its regulated exchanges, highlighting the close relationship between certain event contract platforms and market makers, with some platforms even owning market makers themselves. Last month, the agency also sent letters to the exchanges expressing concerns about "referenced markets," where users trade based on what someone might say in a speech or broadcast. The letters stated that such markets are more susceptible to manipulation.
Former CFTC Chairman J. Chris Giancarlo stated that these measures indicate that the institution is establishing a robust safeguard. "What they are saying is, 'This kind of innovation should take place here, and it is our responsibility to establish a regulatory framework for it.'"
However, the committee remains firmly supportive of this new category of assets. It continues to defend these platforms in disputes with various states in the United States, which argue that their sports-related products are essentially gambling, while also continuing to approve new products launched by exchanges.
Former CFTC employee and Lowenstein Sandler special advisor David Allen stated that if there are changes in the power dynamics in Washington, these decisions will face greater scrutiny from Congress.
He said, “If the Democrats control either of the two chambers of Congress, then the committee in that chamber responsible for overseeing CFTC will be more stringent with them, calling them in to demand explanations.” He added, “That won’t be pleasant at all.”
Revelation: CNBC has a business relationship with Kalshi, which includes customer acquisition and minority equity investments.
