Kalshi and Polymarket, the two biggest prediction market sites, rushed to institute new industry guardrails and add new surveillance tools on Monday after two key senators announced legislation that could severely curtail the industry’s prospects.
Kalshi said it would ban political candidates from trading on their own campaigns, and it would pre-emptively block anyone involved in college or professional sports from trading contracts related to the sports they play or are employed by.
In a statement, a Kalshi spokesperson said the company’s new features “further demonstrate our commitment to safe markets”.
Polymarket also instituted its own set of bans. The company rewrote its rules to say clearly that users cannot trade on contracts where they might possess confidential information or could influence the outcome of an event. This would include athletes but could also include company officials, policymakers or anyone who would have enough influence to affect the outcome of an event or know the information in advance.
“These rule enhancements make our expectations abundantly clear for every participant across both platforms,” said Neal Kumar, Polymarket’s chief legal officer, in a statement.
Polymarket, in particular, has faced intense criticism after some of its users made substantial bets ahead of the US-Israel war in Iran and the US’s military action in Venezuela earlier this year. Those users appeared to have profited handsomely from knowing in advance that Donald Trump was going to take military action in those regions.
Polymarket advertisements in a subway station in New York City on 5 February. Photograph: Michael Nagle/Bloomberg via Getty Images
Senators Adam Schiff, a Democrat from California, and John Curtis, a Republican from Utah, introduced broad legislation bluntly titled the “Prediction Markets are Gambling act” on Monday that would ban prediction markets from creating contracts related to sports. While prediction markets allow users to bet on everything from the weather to political events, much of their recent growth has been in sporting events. The bill, if enacted, would substantially destroy much of Kalshi and Polymarket’s future business prospects. Both companies have signed business deals with several sports teams and leagues in order to bolster their credibility with sports fans.
Curtis’s home state of Utah has been particularly aggressive in trying to keep Kalshi and Polymarket out of its state. Spencer Cox, Utah’s governor, recently signed legislation that would expand the state’s definition of gambling to include what are known as “prop bets”.
Shares of DraftKings and the parent company of FanDuel, the largest sports betting company in the world, rose sharply on Monday after the senators’ announcement.
While Schiff and Curtis are not the first politicians to propose a broad ban on the activities of prediction markets, the fact that both political parties are becoming skeptical of them is a cause of alarm for the industry. Several states have pre-emptively banned Kalshi and Polymarket, saying that the platforms are in effect a sports betting industry with a technological twist. While Kalshi has tried to sue to get its platform allowed in certain states, such as Nevada and Utah, it has found little success so far.
Kalshi and Polymarket have found backing from the Trump-controlled Commodity Futures Trading Commission, the federal regulator of derivatives and other prediction markets activities. Michael Selig, the CFTC’s chair, has said he would back Kalshi in any of its legal battles at the state level, arguing that federal law pre-empts any state law on this issue.
Any friendly decision the CFTC makes on this industry could end up financially benefiting the president’s family as well. Donald Trump Jr, the president’s son, has invested in Polymarket through his venture capital firm and is a strategic adviser for Kalshi.
