US: Ted Cruz bill would require state approval for prediction markets
US Senator Ted Cruz is preparing legislation that would require prediction market platforms offering sports event contracts to obtain approval from state or tribal authorities, challenging the current federal approach to regulating the industry.
According to Bloomberg Law, Cruz plans to introduce the bill after the November midterm elections. The proposed legislation would target event contracts linked to gambling, including sporting outcomes.
However, the report didn’t establish whether its conditions would extend to every category of prediction market contract.
Cruz, the Chairman of the US Senate Committee on Commerce, Science and Transportation, has questioned whether prediction market platforms that offer sports event contracts comply with existing gambling laws.
In May this year, he led a Senate hearing that examined the legality of prediction markets and their potential implications for sports integrity.
His proposed bill would challenge the current regulatory model, under which operators register federally instead of obtaining individual state gambling licenses.
Cruz’ proposal would also conflict with US President Donald Trump’s position that the Commodity Futures Trading Commission (CFTC) should retain authority over prediction markets.
The proposal comes amid a wider dispute over the regulatory authority of prediction markets. Earlier this month, a bipartisan coalition representing 39 states and Washington DC submitted an amicus brief urging the Supreme Court to consider New Jersey’s challenge to prediction market Kalshi.
The coalition argued that states should be able to enforce their gambling laws against prediction market platforms.
Kalshi’s Chief Executive, Tarek Mansour, subsequently warned that requiring state oversight could push prediction market businesses outside of the US. He argued that federal regulation should govern the industry.
Dig Deeper
Related stories
2026/06/29: Multiple factors for Philippines’ online gaming decline but recovery is underway: analysis
2026/08/25: Total Philippines gambling ad ban seen handing market back to illegal operators, data from five countries show
2026/07/22: US Congress questions whether CFTC is fit to oversee prediction markets
2026/07/24: Nevada legislators introduce bill to ban sports event contracts
2026/06/29: Multiple factors for Philippines’ online gaming decline but recovery is underway: analysis
2026/08/25: Total Philippines gambling ad ban seen handing market back to illegal operators, data from five countries show
2026/07/22: US Congress questions whether CFTC is fit to oversee prediction markets
2026/07/24: Nevada legislators introduce bill to ban sports event contracts
The Backstory
Federal oversight meets state gambling authority
Sen. Ted Cruz’s planned bill would land in the middle of a fast-moving fight over whether sports-linked prediction contracts are financial instruments, gambling products or both. Prediction market operators have built their legal case around federal registration and oversight by the Commodity Futures Trading Commission, arguing that event contracts are swaps or derivatives subject to commodities law. State gambling regulators, tribal authorities and licensed sportsbook operators say that framing allows companies to offer what looks like sports betting without state licenses, state taxes or the consumer protections imposed on gambling operators.
The issue has sharpened as platforms such as Kalshi, Polymarket, Crypto.com, Robinhood and Underdog expand or explore sports event contracts. Their opponents say sports markets have become too central to the business to treat the issue as theoretical. A prior industry estimate cited in coverage of a Nevada-backed proposal to ban sports event contracts put sports trading at as much as 90% of prediction-market volume. That figure helps explain why state gambling interests view the federal model as a direct challenge to their regulatory authority rather than a niche financial-market dispute.
Congress has been circling the CFTC question
Cruz’s proposal follows months of congressional scrutiny over whether the CFTC is equipped to police products that increasingly resemble wagering. Lawmakers on the House Agriculture Committee’s commodity markets subcommittee have already examined whether the agency’s mandate fits sports event contracts and whether Congress must clarify the line between financial innovation and gambling. In that hearing, members questioned whether laws written for commodities markets can resolve consumer-protection, integrity and responsible-gaming concerns that traditionally sit with state gambling regulators.
That debate was outlined in earlier reporting on how US lawmakers questioned whether the CFTC is fit to oversee prediction markets. The American Gaming Association and Indian Gaming Association urged lawmakers to ban sports event contracts from prediction platforms, arguing that the products evade the standards imposed on licensed sportsbooks. The NCAA also raised concerns about collegiate sports contracts, warning that markets tied to student athletes could create new integrity and harassment risks.
The lobbying stakes have climbed with the legal uncertainty. Kalshi spent $990,000 on lobbying in the first half of 2026, while the AGA spent $1.4 million fighting the rise of prediction markets. That spending reflects a broader contest over who writes the rules: federal commodities regulators, state gaming commissions, tribal authorities or Congress.
Nevada lawmakers pressed for a harder ban
Cruz’s state-approval approach would not be the first congressional attempt to curb prediction markets, but it would differ from proposals seeking an outright prohibition. Nevada Reps. Steven Horsford and Mark Amodei introduced the “Prediction Markets Are Gambling Act” in July, targeting sports and casino-style event contracts nationwide. Their bill would ban contracts based on sports and casino games and reaffirm that states and tribal governments retain primary responsibility for gambling regulation.
The Nevada effort drew support from the AGA, UNITE HERE and Culinary Workers Union Local 226, underscoring how traditional gaming states and labor groups see prediction markets as a threat to established regulatory and economic arrangements. Nevada’s argument is straightforward: if a product tracks a sporting outcome, attracts sports bettors and generates revenue from those outcomes, it should be regulated like sports betting. The measure also has a Senate companion sponsored by Sens. John Curtis, Adam Schiff and Catherine Cortez Masto.
That approach would leave less room for the hybrid model Cruz is reportedly considering. Instead of banning sports event contracts, his legislation would require platforms to obtain state or tribal approval before offering them. For operators, that could mean losing the central advantage of federal registration: national scale without separate gambling licenses in each jurisdiction. For states and tribes, it would restore the gatekeeping role they say Congress preserved when it left gambling policy largely to local authorities.
States, tribes and platforms build parallel campaigns
The legal fight is no longer confined to Washington. Prediction-market operators and their supporters have been active in state capitals, especially where sports betting remains limited or politically sensitive. The Coalition for Prediction Markets, which represents Coinbase, Crypto.com, Kalshi, Robinhood and Underdog, spent $50,000 on California lobbying over four months, contacting the offices of Gov. Gavin Newsom and Attorney General Rob Bonta. California does not permit sports betting, making prediction markets a particularly sensitive test of whether federal commodities registration can create a practical workaround.
Earlier coverage of the coalition’s California lobbying push on behalf of prediction market operators showed how platforms are trying to shape policy before regulators act. The coalition also spent $100,000 in the second quarter on federal lobbying through Invariant, while Kalshi added state-level spending to its federal campaign. At the same time, Arizona, Nevada, Michigan and Washington have pursued or obtained restrictions involving sports-related event contracts.
Tribal gaming interests have become central opponents. They argue that sports event contracts can infringe on rights secured through tribal-state compacts and federal Indian gaming policy. The dispute has also spilled into sports sponsorship. The Los Angeles Dodgers’ sponsorship arrangement with Kalshi drew attention because the team already had a long-standing partnership with Yaamava’ Resort & Casino, owned by the San Manuel Nation, a tribal gaming operator opposed to prediction markets.
The gambling-law context goes beyond prediction markets
The argument over prediction markets mirrors a broader regulatory dilemma now visible in other jurisdictions: how to channel betting activity into licensed systems without creating openings for unregulated operators. In the Philippines, for example, recent analysis has linked online gaming volatility to a stack of stricter rules, including tougher know-your-customer checks, advertising limits, deposit caps and limits on credit card and cryptocurrency funding. A separate review found that the country’s market decline was not caused by one payments measure alone but by the cumulative weight of compliance obligations.
That analysis of the Philippines’ online gaming slowdown and early recovery offers a useful contrast. Regulators there have tried to keep operators inside the licensed market while increasing safeguards. Payments friction reduced activity, but legal operators began adapting. The lesson for the U.S. debate is that regulatory design affects whether consumers stay within supervised channels or migrate to alternatives that regulators struggle to reach.
A related Philippines debate over advertising bans shows the same channelization problem. An article examining how a total gambling ad ban could hand market share back to illegal operators argued that restrictions binding only licensed companies can strengthen offshore rivals. That dynamic is relevant to prediction markets because both sides claim to be defending consumers: states say federal registration leaves bettors without gambling protections, while platforms say fragmented state approval could push activity offshore or into less transparent markets.
What is at stake if Congress intervenes
Cruz’s proposal would test the balance between national financial-market regulation and local control of gambling. If Congress requires state or tribal approval for sports event contracts, prediction-market operators would face the same fragmented map that sportsbooks navigate. They would need approval in each state or tribal jurisdiction, likely slowing expansion and reducing product availability. The approach would also strengthen state regulators and tribal governments in litigation over whether sports contracts can be offered under CFTC oversight alone.
If Congress leaves the current model intact, the CFTC would remain the main federal gatekeeper, and platforms could continue arguing that state gambling laws are preempted or inapplicable. That outcome would preserve a national path for prediction markets but intensify pressure on the CFTC to address sports integrity, underage access, responsible gaming and market manipulation. It would also keep states, tribes and licensed gaming operators pressing courts and Congress for a clearer boundary.
The dispute is moving toward a defining moment because sports contracts sit at the intersection of two mature regulatory systems. Commodities law favors national markets, standardized oversight and financial innovation. Gambling law favors state licensing, local taxation, tribal compacts and consumer safeguards tied to wagering behavior. Cruz’s bill, if introduced, would not merely adjust prediction-market compliance. It would decide whether sports outcomes can be traded nationally as financial events or must be approved locally as gambling products.
