TL;DR
- All 11 Democrats on the US Senate Banking Committee have called for a public hearing on prediction markets.
- The request came after a special meeting between members of the Republican Committee and CEO of Kalshi, Tariq Mansour.
- Lawmakers say securities-linked forecasting products could raise issues that fall within the Banking Commission’s supervisory responsibilities.
Prediction markets have become a bigger issue on Capitol Hill, and lawmakers are now debating how to scrutinize the industry itself.
All 11 Democrats on the Senate Banking Committee asked Chairman Tim Scott to hold a public hearing on prediction markets, following a private Republican meeting with Calci CEO Tariq Mansour.
Prediction markets cross regulatory boundaries
The CFTC has traditionally been the federal regulator most closely associated with event contracts.
But prediction markets are hurtling into territory that doesn’t fit well into one box.
Products tied to a company’s earnings, securities, or other results can also raise SEC questions.
This leads the Senate Banking Committee to debate.
In their September 23 letter, Democrats on the panel argued that the full panel has an oversight role, and called for the industry to be scrutinized publicly and on a bipartisan basis.
Scott said separately that the Republicans’ meeting with Calci covered innovation, individual investor protection and regulatory issues surrounding securities-related products.
Washington is still working out who regulates what
This isn’t just another argument about sports betting.
Forecasting platforms are expanding to include economic releases, corporate events, politics, and financial market results.
Meanwhile, states continue to challenge some sporting event contracts while federal regulators argue over where jurisdiction begins and ends.
This creates an awkward structure.
The contract can look like a derivative, a prediction market, a gambling product, or something like an option tied to a security depending on the event that determines the payout.
Requesting a public hearing by the Banking Commission does not create new law or change the regulatory status of the Banking Commission.
It shows that prediction markets have become more difficult for Congress to treat as a niche issue at the CFTC.
As products move closer to traditional financial markets, it is likely that more committees and agencies will want to have a say.
For the industry, this may mean more legitimacy, but also more scrutiny.
This article was written by News Desk and edited by Samuel Ray.