Sports Betting Faces Growing Pressure for More Regulations

The regulatory status of prediction markets in the United States is becoming increasingly uncertain, as a surge of new operators coincides with leadership turnover at the Commodity Futures Trading Commission (CFTC). In a farewell address on Wednesday, Commissioner Kristin Johnson cautioned that the agency has “too few guardrails and too little visibility into the prediction market landscape.” Johnson, the fourth CFTC commissioner to step down this summer, urged the commission to act quickly as retail-facing platforms expand into sports and election contracts.

Her remarks underscored the absence of a clear framework for products such as those offered by Kalshi, which won a federal court case earlier this year to offer contracts on the November 2024 elections. Johnson warned that without clear rules, firms could pursue leveraged or margined contracts that expose retail customers to significant risks. “The stakes are high,” she said. “If I only have one piece of wisdom to share, it would be the following – get it right. Measure twice, cut once.”

Leadership Vacuum at the CFTC

Johnson’s departure leaves Acting Chair Caroline Pham as the sole commissioner. Pham has announced she will step down once President Donald Trump’s nominee, Brian Quintenz, is confirmed by the Senate. A confirmation vote was delayed in July without explanation, leaving the agency in a fragile position as it faces mounting regulatory challenges.

Federal vs. State Oversight

While the CFTC holds authority over event contracts, state gambling regulators have moved more aggressively to push back against sports-related prediction markets. Regulators in Nevada and Ohio have issued cease-and-desist letters to operators, warning that such markets may be indistinguishable from sports betting.

In July, the Ohio Casino Control Commission cautioned licensed sportsbooks that offering prediction markets could put their licenses at risk. The move came shortly after FanDuel announced plans for a new prediction product. DraftKings and Underdog have also signaled interest, with Underdog launching markets through a partnership with Crypto.com. Financial apps Webull and Robinhood are also moving into the space by offering Kalshi products. The divergent federal and state approaches have created an uncertain legal environment. Analysts estimate that U.S. prediction markets could grow to several billion dollars annually if regulatory clarity is established.

Adding to the shifting landscape, blockchain-based platform Polymarket announced this week that it received the CFTC’s “no action” position on its $112 million acquisition of QCEX, a registered exchange. The move effectively clears the way for Polymarket to reenter the U.S. market after a 2022 settlement with the CFTC forced it to exit.

Polymarket CEO Shayne Coplan said on social media that the company now has “the green light” to operate domestically, though no launch date has been set. The approval comes after federal investigations into the company, including an FBI search of Coplan’s residence, were closed earlier this summer.

The stakes are high… get it right. Measure twice, cut once.

A Rapidly Shifting Market

Johnson also raised concerns about firms seeking CFTC licenses under traditional categories and then pivoting to self-certify prediction market products. Some, she noted, quickly transfer or auction their licenses, raising questions about the adequacy of current oversight.

With major financial and gaming firms entering the space, the tension between innovation and consumer protection is intensifying. The outcome of pending regulatory decisions—both at the federal and state levels—will determine whether prediction markets evolve into a mainstream financial product or remain confined to legal uncertainty.