Shares of DraftKings Inc. (DKNG) and Flutter Entertainment PLC (FLUT), the parent company of FanDuel, surged on Monday morning following news of a proposed bill that could restrict competition from prediction markets against sports betting operations.
Both gambling stocks rose more than 4% after The Wall Street Journal reported that two senators plan to introduce legislation on Monday prohibiting prediction market operators from offering event contracts related to sporting events.
The bill, co-sponsored by California Democratic Senator Adam Schiff and Utah Republican Senator John Curtis, aims to regulate prediction market platforms such as Kalshi and Polymarket. It would ban these platforms from offering contracts on sporting events, as well as contracts based on "casino-style games" like electronic poker, blackjack, and bingo.
Senator Schiff told The Wall Street Journal that Congress should intervene now because the U.S. Commodity Futures Trading Commission (CFTC) "is giving a green light to these markets, even encouraging their development."
Senator Curtis added, "Too many young people in Utah are being exposed to addictive sports betting and casino-style game contracts. These activities should be regulated by the states, not by a federal agency."
Prediction markets have positioned themselves as distinct from the gambling industry, claiming they provide a marketplace where participants bet against each other rather than against a "house." Although these markets allow participants to wager on the outcomes of various future events, such as elections or Oscar winners, a significant portion of contracts are tied to sporting events.
However, scrutiny has intensified with the rise of sports-related contracts on these platforms and ongoing jurisdictional disputes between state and federal regulators.
The CFTC asserts that it holds exclusive regulatory authority over prediction markets and has indicated that event contracts, even if not explicitly defined under its regulations, could be classified as derivatives or "swap" contracts.
Conversely, several states, including Nevada and Arizona, argue that prediction markets violate their state gambling laws. Since the U.S. Supreme Court overturned the federal ban on sports betting in 2018, the sports betting markets operated by DraftKings and FanDuel have been primarily regulated by state gaming commissions. Sports betting remains illegal in 11 states.
Last Wednesday, Arizona Attorney General Chris Mays filed a criminal complaint against Kalshi, accusing the prediction market operator of conducting "illegal gambling" and "election betting" without a license.