The prediction markets news just keeps flowing.
After Kalshi was ordered to temporarily shut down in Nevada and the Kentucky House passed a bill to ban sports betting licensees who partner with prediction markets late last week, Kalshi and Polymarket both vowed they are taking firmer stances to combat insider trading.
As we do every Friday, SBC Americas rounded up some of the developments you might have missed this week. Oh, and did you hear about SBC Summit Americas’ dedicated Prediction Markets Forum, coming as part of the Fort Lauderdale event in June?
Congress continues legislative onslaught
The total number of federal bills aimed at clamping down on event contracts is now around double figures after multiple new neatly acronymed pieces of legislation were filed in Congress this week.
Illinois Democrat Nikki Budzinski and Nebraska Republican Adrian Smith’s bipartisan PREDICT Act would ban a host of congressional staff, political appointees, executive branch workers and more from trading on prediction markets related to political events or policy decisions. Meanwhile, a group of Dems led by Sens. Jeff Merkley and Elizabeth Warren lodged the STOP Corrupt Bets Act, the latest bill that would ban prediction market contracts on elections, government actions, war and sports.
If you’re keeping count, those efforts add to other federal bills such as the Prediction Markets Are Gambling Act, the DEATH BETS Act, the Prediction Markets Security and Integrity Act, the Public Integrity in Financial Prediction Markets Act, the End Prediction Market Corruption Act, the Event Contract Enforcement Act and more.
Newsom makes the news some
As well as all of the federal (and state-level) bills getting hot under the collar about prediction markets, numerous high-profile politicians have spoken out publicly about the vertical in recent weeks, including Florida Gov.Ron DeSantis, New York Rep. Alexandria Ocasio-Cortez, and California Gov. Gavin Newsom.
On Friday, just before we published this roundup, Newsom signed an executive order that states that all California state officials are henceforth banned from using insider knowledge to profit or assist another person in profiting from prediction market trading. The governor’s office referenced various reports suggesting that people within or with knowledge of the federal government “are cashing in, placing well-timed bets ahead of major Trump administration actions and walking away with profits.”
“We’re not going to tolerate this kind of corruption in California,” said Newsom in a statement.
Kalshi March Madness volume through the roof
It was around this time last year that Kalshi embraced sports event contracts in time for the 2025 March Madness tournaments. Fast-forward 12 months, and it’s taking billions of dollars in trading volume on the NCAA championships.
Kalshi has eclipsed $10bn in trading volume through the first four weeks of March, per multiple analyses. Around 90% of that business has come from sports, and roughly 50% has been basketball. It processed more than $2bn worth of trades on the first four days of the men’s tournament alone, reaping more than $25m in trading fees. The largest day by volume was Thursday, March 19, when 91% of the $588m was traded on sports.
Keep in mind that volume does not equal sports betting handle as it includes both sides of the transaction, i.e. the market-making activity as well as users’ bets.
Kalshi and Polymarket, rivals but VC friends?
Kalshi and Polymarket may be competing for traders’ business in the U.S. in a range of categories including sports, but they’re ready to team up for one particular purpose.
Their respective CEOs, Tarek Mansour andShayne Coplan, are among the initial investors in a new venture capital fund aimed at supporting the growing prediction market industry through investment in analytics and trading firms, among other things.
5c(c) Capital, as reported by sites including Bloomberg and Fortune, is a venture founded by ex-Kalshi employees Adhi Rajaprabhakaran and Noah Zingler-Sternig, and is named after the section of the Commodity Exchange Act related to prediction markets. “At the moment, prediction markets might appear to be just about sports, but that is only the latest chapter in what we believe to be a very long story,” wrote the founders in a mission statement.
Squeezing the Juice Reel
A note from Citizens analyst Jordan Bender, citing data from Juice Reel, suggested that prediction market traders fare worse in their “gambling” than typical online sports bettors who use licensed sportsbooks.
Some of Bender’s conclusions from the data analysis include:
- That prediction market users get a worse return on investment than sports bettors, generally speaking.
- That crossover players who use both legal sports betting apps and platforms that offer sports event contracts are, on average, “lower-quality customers to the sportsbooks.”
- That prediction markets tend to attract both a younger average player base and “more sophisticated users,” a cohort that is not necessarily engaging with traditional sportsbooks but more likely offshore sites.
- That while prediction markets may not be materially taking share from existing sportsbook users, they could be diverting potential new players, particularly in regulated sports betting states, who might have otherwise downloaded a sports betting app.
- That while prediction markets are ”the most competition we have seen in the betting industry since the initial launch of regulated gambling in the U.S.,” the sports-focused prediction market product is not currently superior to a typical online sportsbook.
An Advisory Committee and a Task Force? In this economy?
The Commodity Futures Trading Commission (CFTC) announced the launch of a new Innovation Task Force, the intent of which it said is to help to promulgate clear rules for various products under the commission’s oversight, including prediction markets and event contracts.
Note that this is different from the Innovation Advisory Committee that was unveiled in February, a 35-person committee that includes the likes of the Chief Executive Officers of Kalshi, Polymarket, CME Group, Crypto.com and Robinhood, as well as DraftKings CEO Jason Robins and FanDuel President Christian Genetski.
The Task Force will work with the Advisory Committee and the CFTC to develop a regulatory framework for innovators focused on prediction markets, crypto assets, blockchain technologies and AI systems.
