Coalition Rejects Trump Admin Push to Let Kalshi, Polymarket 'Bypass State Gambling Regimes'

A coalition of consumer advocacy groups on Friday forcefully condemned the Commodity Futures Trading Commission's move to give prediction market platforms like Kalshi and Polymarket "a green light to bypass state gambling regimes."

Users of these platforms can bet on future events, from the outcome of a sports game to the language of a political speech, by buying "shares," or "contracts." The Trump administration claims the platforms are not gambling operations, but derivatives markets because, as Chair Michael Selig has noted, "Congress has entrusted the CFTC with the sole authority to regulate" those.

Various state leaders and organizations have pushed back, arguing that "calling a sports wager an 'event contract' does not transform it into a legitimate tool for managing economic risk," as Demand Progress Education Fund communications director Eric Naing said Friday. "The CFTC should not allow federal derivatives law to become a back door for nationwide gambling."

However, the CFTC has stuck to its position, publicly backed by President Donald Trump, who has declared that the agency must have "exclusive authority" over this "major industry," which "we must protect." The Republican—who infamously bankrupted multiple casinos—notably has a company exploring how to cash in on the sector.

The CFTC announced its proposed rules for prediction markets in March, followed by an update last month. In a Friday letter to the agency chair, Demand Progress Education Fund and 10 other organizations wrote that "we oppose the proposal in its entirety. It fails as a matter of law, as a matter of policy, and as a matter of institutional competence, and we emphatically urge the commission to withdraw it."

"When Kalshi and Polymarket launched just five years ago, they were curiosities; today Kalshi alone is valued at $22 billion and processes an annualized volume of $178 billion in trades every month," the coalition detailed. "This proposal should be understood for what it is: a green light for these immense and largely unregulated financial speculation platforms to offer sports betting nationwide and aggressively market it to the public, bypassing the community and mental health protections that states and tribal authorities have spent generations building to address the risks present in this type of speculative activity."

The fact that 89% of Kalshi's total fee revenue comes from sports-related contracts "should settle the question of whether these companies are derivatives exchanges or sportsbooks," according to the coalition, which also includes Americans for Financial Reform Education Fund, Better Markets, Center for Digital Democracy, New Jersey Appleseed Public Interest Law Center, Open Markets Institute, Oregon Consumer Justice, Oregon Consumer League, Protect Borrowers, Public Good Law Center, and Revolving Door Project.

However, the organizations also challenge the CFTC's interpretation of the Commodity Exchange Act, writing that the proposal's "framing inverts the statute's logic and Congress' intent, by treating contracts as presumptively allowed unless found contrary to the public interest through a case-by-case inquiry."

If the agency charges ahead with its current plans, "ordinary people will pay the price," the groups warned. "Expanded sports betting has increased personal bankruptcies, reduced household savings, and led to higher rates of domestic violence. Prediction markets supercharge these effects: they run 24/7 in your pocket and aggressively market to young adults, who may make low bets initially but ramp up their commitment over time. Seventy percent of users lose money, and 70% of all profits go to 0.04% of traders. Those outcomes define a casino that has figured out how to escape the regulations that casinos have to follow, like responsible gaming disclosures and financial stability protections for their customers."

"The proposal also does almost nothing to address the insider trading problem that makes prediction markets much more easily manipulated than the structures of ordinary gambling," the coalition wrote—just over a week after the White House had to address one of Trump's teleprompter operators allegedly using his access to the president's speech plans to make money on Kalshi.

The organizations further argued that "even if the commission were the right institution to police all of this, it is not capable of doing so. The CFTC, which oversees $400 trillion in US derivatives markets, has a budget frozen at $365 million... Adding nationwide responsibility for sports betting, entertainment wagering, and political gambling on top of that is not a proper expansion of the agency's mission, and it would mean that the farmers, manufacturers, and energy companies who depend on well-functioning commodity markets will pay the price."

"We urge the commission to withdraw this proposal, enforce the rules already on the books, and return its attention to the derivatives markets it was created to protect—and which genuinely need its attention," concluded the coalition. "The regulation of gambling and gaming belongs with the states and tribal authorities that have the experience, the tools, and the democratic accountability to do the job."