What Happened This Week
On March 23, 2026, Senators Adam Schiff (D-California) and John Curtis (R-Utah) introduced the Prediction Markets Are Gambling Act — the first bipartisan Senate bill targeting the prediction market industry. The legislation would amend the Commodity Exchange Act to prohibit any CFTC-registered platform from listing contracts related to sporting events or casino-style games. Hours later, both Kalshi and Polymarket rushed to announce new insider trading bans and surveillance measures.
The timing was not coincidental. The bill landed in the middle of an escalating crisis: criminal charges against Kalshi in Arizona, suspicious trading activity on geopolitical events, a MrBeast editor caught trading on insider information, and 11 states introducing their own prediction market legislation. What had been a regulatory skirmish between states and platforms has become a full-scale battle involving Congress, the CFTC, state attorneys general, tribal governments, and the White House.
This article explains what's happening, why it matters, and what it means for anyone trading on prediction markets right now.
The Insider Trading Scandals That Triggered the Crackdown
The prediction market industry's integrity problem didn't appear overnight. It built through a series of incidents over the past three months, each one raising the same question: can anonymous strangers profit from non-public information about military strikes, product launches, and political events — and can anyone actually stop them?
The Venezuela Bet: $400,000 in Profit on a 5% Probability
In late January 2026, an anonymous Polymarket user created an account, deposited funds, and placed a series of large bets that Venezuelan President Nicolás Maduro would be ousted from power before January 31. At the time, Polymarket listed the probability of Maduro's removal at roughly 5.5%. Kalshi had it even lower — around 7%.
When US forces seized Maduro and his wife from their home on January 25, the anonymous account netted $436,759.61. The account had been created less than a week before the capture. It traded exclusively on Maduro-related contracts, including bets on whether the US would go to war with Venezuela — all placed within 24 hours of the military action.
Senator Ruben Gallego (D-Arizona) called it what most observers were thinking: insider trading in broad daylight.
The Iran War Trades: Hundreds of Thousands More
The pattern repeated weeks later. As US military action against Iran escalated in early 2026, Polymarket traders placed large, suspiciously well-timed bets on the timing and scope of American strikes. One user reportedly made hundreds of thousands of dollars on wagers related to the precise timing of US operations — information that would only be available to someone with access to classified military planning.
Israeli authorities subsequently arrested several individuals and charged two of them with using classified information to place bets about upcoming military operations on Polymarket. The case represented the first international law enforcement action tied directly to prediction market insider trading.
The MrBeast Editor: Kalshi's First Public Enforcement
In February 2026, Kalshi disclosed its first public enforcement action. An editor who worked for YouTube creator MrBeast (James Donaldson) was suspended from the platform and reported to federal regulators after Kalshi's surveillance systems detected insider trading on contracts related to MrBeast's content. The editor had traded on outcomes they could directly predict through their work — a textbook insider trading scenario.
Kalshi revealed that over the past year it had opened 200 insider trading investigations, with 12 still ongoing. Fines collected from the two publicly disclosed cases were donated to a non-profit that provides consumer education about derivatives markets.
The OpenAI and Google Cases
Smaller but revealing incidents added to the pattern. In December 2025, a group of Polymarket accounts bet that OpenAI would debut a new model by mid-month. When OpenAI released GPT-5.2 on December 11, the accounts collectively made $13,000. Separately, a Polymarket trader netted $1 million over 24 hours with bets on Google's Year in Search rankings, prompting a Meta engineer to publicly accuse the account of insider trading.
None of these cases resulted in criminal charges. But taken together, they painted a picture of an industry where the tools to detect and punish insider activity lagged far behind the incentives to commit it.
The Prediction Markets Are Gambling Act: What It Actually Says
The Schiff-Curtis bill is narrow in scope but potentially devastating in impact. Here's what it would do — and what it wouldn't.
What the Bill Prohibits
The legislation would amend the Commodity Exchange Act to ban any CFTC-registered designated contract market from listing or making available any "agreement, contract, or transaction relating to any sporting event or athletic competition." It separately bans "casino-style games" — defined as contracts that resemble blackjack, poker, slot machines, or other traditional casino offerings.
In plain English: if this bill passes as written, Kalshi, Polymarket, DraftKings Predictions, and every other CFTC-registered platform would be forced to pull all sports contracts and any casino-style games from their platforms.
What the Bill Does NOT Prohibit
The bill does not touch prediction markets on politics, economics, crypto, weather, culture, or other non-sports categories. Contracts on Fed rate decisions, election outcomes, inflation data, Bitcoin price targets, and similar events would remain fully legal under this legislation.
This is a critical distinction. The bill targets sports specifically because that's where the state-versus-federal jurisdictional conflict is most acute. Sports betting is regulated by states. Prediction markets are regulated by the CFTC. When prediction markets offer sports contracts, they're effectively operating a nationwide sports betting product that bypasses every state gambling commission, generates no state tax revenue, and operates without state consumer protections.
Why This Bill Matters More Than Previous Proposals
Prediction markets have faced hostile legislation before, including the Blumenthal-Kim bill introduced on March 12 and the BETS OFF Act from Senator Chris Murphy and Representative Greg Casar. But the Schiff-Curtis bill carries two features the others lack.
First, it's bipartisan. Schiff is a Democrat on the Senate Agriculture Committee (which oversees the CFTC). Curtis is a Republican from Utah — a state that bans all gambling. When both parties agree on restricting an industry, the legislative odds improve dramatically.
Second, it has powerful institutional backing. The American Gaming Association (AGA), which represents every major US casino and sportsbook operator, immediately endorsed the bill. The AGA's members — MGM, Caesars, FanDuel, and others — have watched prediction markets capture sports betting market share without paying state taxes, and they want it stopped. For a deeper understanding of how prediction markets compete with traditional sportsbooks, see our prediction markets vs. sports betting comparison.
What Kalshi's Co-Founder Said
Tarek Mansour, Kalshi's co-founder, responded on X calling the bill the "casino lobby hard at work" and arguing that a ban would push activity offshore where no regulation exists. His position — shared by most of the prediction market industry — is that sports contracts are commodity derivatives, not sports bets, and that only the federal government has jurisdiction over them.
What Kalshi and Polymarket Are Doing in Response
Both platforms announced significant new integrity measures on March 23, 2026. Here's how they compare.
Kalshi's New Rules
Kalshi introduced three major changes:
Preemptive sports screening. In partnership with Integrity Compliance 360 (IC360), the same monitoring firm used by state-regulated sportsbooks, Kalshi will proactively block anyone involved in college or professional sports — including athletes, team personnel, and referees — from trading on markets related to sports they're involved in.
Preemptive politician screening. Political candidates are now banned from trading on their own campaigns. This extends an existing ban on elected officials. The change follows the Kyle Langford incident in May 2025, where a California gubernatorial candidate publicly posted about trading on his own candidacy on Kalshi before being banned.
Whistleblower feature. Kalshi is adding a tool that lets users flag potential violations of trading rules directly within the platform.
Polymarket's New Rules
Polymarket took a broader approach:
Comprehensive insider trading ban. Polymarket rewrote its rules to prohibit users from trading on contracts where they might possess confidential information or could influence the outcome of an event. This covers athletes, company officials, policymakers, and anyone with enough influence or access to affect an outcome.
Multi-layered surveillance. Polymarket said it uses partners including Palantir and TWG AI to monitor trading patterns and identify suspicious activity.
Enforcement measures. The platform outlined a range of potential responses to violations, including account suspension, position liquidation, and referral to law enforcement.
Neal Kumar, Polymarket's chief legal officer, stated that the new rules "make our expectations abundantly clear for every participant across both platforms."
Are These Measures Enough?
Probably not. The fundamental challenge with insider trading on prediction markets is structural: Polymarket's global platform operates on blockchain with pseudonymous wallets. Even the US platform, while KYC-compliant, relies on post-hoc surveillance rather than pre-trade screening. Kalshi's IC360 partnership gives it stronger pre-trade blocking for sports, but the political and geopolitical categories — where the Venezuela and Iran scandals occurred — remain harder to police.
As one legal expert told CBS News: if these platforms don't implement their own regimes, someone in Congress will do it for them.
The Bigger Picture: 11 States, Criminal Charges, and a $600 Million Tax Fight
The insider trading scandals and the Schiff-Curtis bill are only one front in a multi-front war over prediction markets. Here's the broader regulatory landscape as of March 2026.
Arizona Criminal Charges
On March 18, 2026, Arizona Attorney General Kris Mayes filed the first-ever criminal charges against a prediction market platform, accusing Kalshi of operating an illegal gambling operation in violation of state law. Kalshi faces 20 misdemeanor counts related to accepting bets on sporting events and elections in Arizona.
Kalshi called the case "paper-thin" and maintained that prediction markets can only be regulated by the federal government. The case is pending in Maricopa County Superior Court.
11 States Introducing Legislation
According to MultiState, a regulatory tracking firm, 11 states have introduced prediction market legislation in 2026. Approaches range from full bans to taxation frameworks:
- Hawaii passed a House bill expanding the definition of gambling to include prediction markets.
- Kentucky passed a House bill imposing a 17.25% tax on prediction market transaction fees.
- Utah Governor Spencer Cox signed legislation expanding the state's definition of gambling to include prop bets.
- Illinois Senator Michael Hastings introduced a bill that would license prediction markets with a $1 million fee and 50% privilege tax.
- New York proposed direct restrictions through Assembly and Senate bills.
State regulators in 11 states have issued cease-and-desist orders against prediction market operators, arguing they function as unlicensed sports betting platforms. According to MultiState's analysis, states estimate they've lost over $600 million in sports betting tax revenue to prediction markets operating without state licenses.
For a complete breakdown of the legal situation by state, see our guide to prediction market legality.
The CFTC's Position
CFTC Chairman Michael Selig has taken the opposite stance from state regulators. In February 2026, the CFTC filed an amicus brief asserting exclusive federal jurisdiction over prediction markets, arguing that states do not have the authority to regulate products within the CFTC's domain.
Selig has publicly vowed to back Kalshi in its state-level legal battles and to defend the CFTC's sole regulatory authority over commodity derivatives. The Trump administration broadly supports prediction market platforms — a position complicated by the fact that Donald Trump Jr. has invested in Polymarket through his venture capital firm and serves as a strategic advisor for Kalshi.
MLB Partnership with Polymarket
In a development that illustrates just how rapidly this space is evolving, Major League Baseball announced a partnership with Polymarket on March 19, 2026 — just four days before the Schiff-Curtis bill was introduced. The multiyear deal makes Polymarket the league's exclusive prediction market partner and gives the platform access to MLB's trademarks and logos. MLB also signed a memorandum of understanding with the CFTC focused on information-sharing concerning prediction markets and sports event contracts.
The NHL also has partnerships with both Polymarket and Kalshi. These league deals suggest that professional sports organizations see prediction markets as a legitimate fan engagement tool — a position that may shift if the Schiff-Curtis bill advances.
What This Means for Prediction Market Traders
If you're currently trading on prediction markets, here's the practical impact of everything above.
Your Sports Contracts Are at Risk — But Not Immediately
The Schiff-Curtis bill would kill sports contracts on CFTC-regulated platforms if it becomes law. But legislation takes time. The bill must clear the Senate Agriculture Committee, pass the full Senate, pass the House, and be signed by the president. Given the Trump administration's pro-prediction-market stance, a presidential veto is possible even if the bill passes Congress.
The more immediate risk comes from state-level actions. If you're trading in Arizona, Nevada, Massachusetts, Maryland, Ohio, or other states where Kalshi faces active litigation, your access to sports markets could be disrupted on shorter timelines.
Non-Sports Markets Are Not Affected
Politics, economics, crypto, weather, culture — none of these categories are touched by the Schiff-Curtis bill or by most state-level legislation. The regulatory fight is overwhelmingly about sports contracts and whether they constitute gambling under state law. If you primarily trade on Fed decisions, election outcomes, or crypto prices, the current legislative proposals don't directly threaten your activity.
Tax Obligations Haven't Changed
Regardless of how regulation evolves, your tax obligations remain the same. Prediction market profits are taxable income. Neither Kalshi nor Polymarket issues comprehensive tax documents for all users, so you're responsible for tracking your own trades. See our prediction market tax guide for detailed instructions on what to report.
Diversify Across Platforms
The regulatory landscape increasingly favors traders who maintain accounts on multiple platforms. If sports contracts are restricted on one platform due to a state-level ruling, another platform may still be operating while litigation is resolved. Our best prediction market apps comparison covers every major platform, fees, and availability.
Watch for Arbitrage Opportunities
Regulatory uncertainty creates pricing dislocations. When markets on one platform react to news about a potential ban while equivalent markets on another platform lag, arbitrage opportunities emerge. Traders who follow the regulatory story closely can capitalize on these temporary mispricings.
Timeline: How We Got Here
| Date | Event |
|---|---|
| January 2022 | CFTC fines Polymarket $1.4M and forces US exit |
| September 2024 | Federal court allows Kalshi to offer political contracts |
| October 2024 | ICE (NYSE parent) invests up to $2B in Polymarket |
| November 2025 | Polymarket acquires QCEX for $112M; begins US re-launch |
| December 2025 | Polymarket processes $3.74B in monthly volume |
| January 2026 | Anonymous trader nets $436K betting on Maduro capture on Polymarket |
| February 2026 | Kalshi discloses MrBeast editor insider trading case; opens 200 investigations |
| February 2026 | CFTC files amicus brief asserting exclusive federal jurisdiction |
| February 2026 | Tennessee federal court issues TRO allowing Kalshi sports contracts |
| March 2026 | Israeli authorities arrest two for classified-info Polymarket trades on Iran |
| March 12, 2026 | CFTC launches formal rulemaking (ANPRM); Blumenthal-Kim bill introduced |
| March 12, 2026 | CFTC issues first guidance on manipulation in prediction markets |
| March 18, 2026 | Arizona files criminal charges against Kalshi (20 misdemeanor counts) |
| March 19, 2026 | MLB announces Polymarket partnership; signs MOU with CFTC |
| March 19, 2026 | Point72, Balyasny ban staff from prediction market trading |
| March 23, 2026 | Schiff-Curtis introduce "Prediction Markets Are Gambling Act" |
| March 23, 2026 | Kalshi announces sports screening, politician bans, whistleblower tool |
| March 23, 2026 | Polymarket announces comprehensive insider trading ban, Palantir/TWG AI surveillance |
What Happens Next
The next 90 days will likely determine the near-term trajectory of the prediction market industry. Several key events to watch:
Senate Agriculture Committee action. As a member of the Committee, Schiff can push for hearings on the bill. Whether Chairman John Boozman schedules them — and how quickly — will signal how seriously the Senate treats the legislation.
Arizona criminal case. The Kalshi prosecution in Maricopa County will be the first criminal trial involving a prediction market. The outcome could set a precedent for how other states approach enforcement.
State legislation. Hawaii's gambling expansion bill and Kentucky's taxation bill are both advancing through their legislatures. If either passes and is signed into law, it will establish new models for how states can regulate or tax prediction markets.
CFTC rulemaking. The CFTC's Advanced Notice of Proposed Rulemaking (ANPRM), launched March 12, will gather public comment and potentially produce formal regulations governing event contracts. This is the CFTC's first attempt at comprehensive prediction market rules.
Supreme Court trajectory. With federal courts reaching conflicting conclusions on preemption — courts in Tennessee and New Jersey have sided with platforms, while Maryland and Nevada have sided with states — the legal conflict appears headed toward the Supreme Court. A definitive ruling on whether federal law preempts state gambling regulation would reshape the entire industry.
For users who want to understand how prediction markets work at a fundamental level before navigating this regulatory complexity, our pillar guide covers the mechanics, platforms, fees, and strategies in full.
Frequently Asked Questions
Are prediction markets going to be banned?
Not entirely. The Schiff-Curtis bill targets only sports contracts and casino-style games. Politics, economics, crypto, weather, and culture markets are not affected by this legislation. Even for sports, the bill must pass both chambers of Congress and be signed by the president — a process that typically takes months and faces uncertain odds given the Trump administration's pro-industry stance.
Is it still safe to trade on Kalshi and Polymarket?
Both platforms remain CFTC-regulated and fully operational. Your funds are held in segregated accounts under federal oversight. However, regulatory risk is real — state-level rulings could restrict access to certain market categories in specific jurisdictions. Monitor your state's legal status using our legal guide.
Can I get in trouble for insider trading on prediction markets?
Yes. Insider trading on CFTC-regulated platforms is prohibited by both platform rules and federal law. The CFTC issued formal guidance on manipulation in prediction markets on March 12, 2026. Both Kalshi and Polymarket have active surveillance programs and have referred cases to federal regulators. Israeli authorities have also arrested individuals for insider trading on Polymarket.
What does the Schiff-Curtis bill mean for DraftKings and FanDuel prediction markets?
DraftKings Predictions and FanDuel Predicts are both CFTC-regulated and would be subject to the same restrictions if the bill passes. Sports contracts — which represent the majority of their prediction market offerings — would need to be removed. Both companies also operate state-licensed sportsbooks, however, so their traditional betting products would be unaffected.
How does this affect my taxes?
It doesn't change anything. Prediction market profits remain taxable income regardless of regulatory changes. See our tax guide for details on reporting.
Where is the prediction market industry headed?
The industry is at an inflection point. Volume has never been higher — $64 billion in 2025, with a $200B+ annual run rate in 2026. Both Kalshi and Polymarket carry ~$20 billion valuations. But the regulatory environment is the most hostile it's ever been. The most likely outcome is that non-sports prediction markets continue to grow while sports contracts face increasing restrictions at both state and federal levels. For more context on industry trends, see our best prediction market apps hub page.
