Senators Adam Schiff and John Curtis on Monday introduced the "Prediction Markets Are Gambling Act," a bipartisan measure that would bar Commodity Futures Trading Commission-registered firms such as Kalshi and Polymarket from offering sports prediction contracts and casino-style event contracts. The bill would amend the Commodity Exchange Act to prohibit event contracts tied to professional and collegiate sports, along with games including blackjack, roulette and lotteries, according to the legislative text. It would also block such products from being listed or traded on regulated exchanges and states explicitly that federal law would not override existing state gambling restrictions. Curtis said the proposal is intended to clarify regulatory jurisdiction, preserve state authority over betting markets and curb the spread of speculative products into areas he views as inappropriate. "Too many young people in Utah are getting exposed to addictive sports betting and casino-style gaming contracts that belong under state control, not under federal regulators," he said, adding that the bill is meant to "protect families" and keep speculative financial products out of gambling-like markets. Schiff argued that sports-related prediction contracts, now broadly available nationwide, function as betting products and said the CFTC has enabled their expansion rather than enforcing limits. "Rather than enforcing the law, the CFTC is greenlighting these markets and even promoting their growth," he said, calling for Congress to close what he described as a backdoor that undermines state consumer protections, intrudes on tribal sovereignty and generates no public revenue. The legislation comes as prediction markets continue to scale rapidly. Combined trading volumes across the sector reached $44 billion in 2025, and industry forecasts suggest volumes could top $50 billion this year. Sports-related activity has been a major driver of that growth and a key revenue stream for leading platforms. States have expanded regulated sports betting since the 2018 Supreme Court decision allowed legalization at the state level, creating frameworks that generate meaningful public revenue and incorporate consumer safeguards. Prediction markets operate under federal CFTC oversight as financial instruments rather than gambling products, a distinction that critics say allows platforms to bypass state licensing and tax requirements. States collected billions in sports betting tax revenue in 2025. The rise of federally regulated prediction markets offering similar products without contributing to state coffers has prompted objections from governors, state gaming commissions and tribal nations. Kalshi and Polymarket are also facing mounting legal pressure as states challenge their operations as illegal betting platforms. With dozens of lawsuits and mixed rulings, including matters proceeding in Nevada and disputes in Massachusetts, the firms have leaned on CFTC oversight as a central defense. The CFTC has stepped up its pushback against state challenges in a new court filing, arguing that congressional authority extends to commodity-linked event contracts and should preempt state regulation. Chair Michael Selig said the agency's jurisdiction covers these products and should take precedence over state-level rules.

U.S. financial regulators have redrawn the lines for crypto supervision. On Tuesday, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) issued joint interpretive guidance that treats most digital assets as commodities or "digital tools," dialing back the SEC's enforcement-led posture. The shift quickly reignited conflict-of-interest allegations tied to World Liberty Financial, the DeFi lending project controlled by the Trump family, with critics arguing the new framework reduces disclosure and compliance burdens that previously applied. Key points - Token taxonomy: The SEC/CFTC framework classifies most crypto assets as commodities, generally removing them from securities-registration requirements. - Conflict concerns: Market observers say the change could advantage World Liberty Financial by easing disclosure and lockup-style constraints that would have applied under earlier interpretations. - Legislative bridge: SEC Chair Paul Atkins describes the guidance as a stopgap while Congress remains deadlocked on the Digital Asset Market Clarity Act. How the "token taxonomy" works At a Blockchain Summit in Washington, D.C., Atkins described the approach as a "token taxonomy," signaling a sharp turn from prior policy. Under the joint guidance, most digital assets—including payment tokens, NFTs labeled as "digital collectibles," and utility assets—are treated as distinct from securities. Only on-chain representations of traditional securities—such as tokenized stocks and bonds—remain squarely under the SEC's securities remit. The agencies cast the move as an "innovation first, enforcement second" operating stance. Why regulators moved now The timing tracks the administration's push for the Digital Asset Market Clarity Act, which has stalled in Congress amid disagreements, including over stablecoin interest provisions. By issuing guidance ahead of legislation, the SEC and CFTC effectively create a provisional safe harbor that resembles the bill's intended structure without requiring a vote. Supporters call it a bridge to regulatory certainty. Detractors say it sidelines the tougher oversight associated with the Gensler era and leaves markets reliant on agency discretion rather than statute. Scrutiny over World Liberty Financial The policy shift has amplified governance questions because a looser compliance regime could disproportionately benefit politically connected projects. Insiders point to World Liberty Financial as a likely near-term winner, since earlier interpretations were viewed as imposing stricter disclosure and lockup expectations on token-linked initiatives. Todd Baker, a senior fellow at Columbia Law School, said the framework appears designed to enable "profit-making but socially valueless" trading with limited federal oversight. The change also contrasts with recent enforcement history, when firms faced significant litigation risk—including lawsuits involving Gemini tied to internal governance and strategy changes. Under the new taxonomy, comparable actions against projects like World Liberty Financial may be harder to pursue so long as they do not tokenize existing securities. Competitiveness argument vs. two-tier fears Critics warn the guidance could create a two-tier system in which well-connected projects gain faster access to liquidity and fewer compliance hurdles. Industry supporters argue the recalibration is necessary for U.S. competitiveness. Cody Carbone of The Digital Chamber characterized it as a course correction as other jurisdictions continue to waver—citing South Korea's ongoing debate over whether to abolish crypto taxes to curb capital flight. Summer Mersinger of the Blockchain Association said SEC-CFTC coordination should help in the "near term," but the conflict-of-interest questions are unlikely to fade. For markets, the bigger issue is durability. Guidance can be reversed by a future chair. Only legislation can lock in the rules. Until the Digital Asset Market Clarity Act clears Congress, investors are effectively trading on administrative permission rather than settled law.