By classifying bets as swaps or commodity contracts rather than gambling, Kalshi and Polymarket successfully operate in all 50 states|@Polymarket|X

A new bipartisan Senate bill aims to shut down the “backdoor” allowing sports betting on federal prediction markets like Kalshi and Polymarket.

Introduced by Senators Adam Schiff and John Curtis, the Prediction Markets Are Gambling Act would prohibit such platforms from listing contracts on sports events and casino games.

While these platforms are currently overseen by the Commodity Futures Trading Commission (CFTC) as derivatives exchanges, lawmakers argue they are essentially operating illegal gambling services that bypass state regulations and consumer protections.

By classifying bets as swaps or commodity contracts rather than gambling, Kalshi and Polymarket successfully operate in all 50 states, including ones where sports betting remains illegal.

Shares of traditional sportsbooks like DraftKings, PENN Entertainment, and MGM rallied as the new bill signaled the prospect of eliminating competition.

The state of Arizona recently filed criminal charges against Kalshi for unlicensed gambling, while concerns over insider trading have plagued the sector.

The legislative push comes as prediction markets are doing exceptionally well.

Kalshi recently hit a $22 billion valuation, while rival Polymarket is seeking a similar valuation. The founders of the two companies are launching a new venture capital fund, 5c(c) Capital, which will focus on prediction markets.