A group of U.S. senators has proposed a law to ban federally regulated prediction markets from offering contracts on sports events, raising questions about how these markets will be regulated, according to a Wall Street Journal report.The bill is co-sponsored by Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah). It would remove sports-related contracts from the Commodity Futures Trading Commission’s (CFTC) authority and place them under state oversight. “The CFTC is greenlighting these markets and even promoting their growth,” said Sen. Schiff. “It’s time for Congress to step in and eliminate this backdoor, which violates state consumer protections.”Join the inaugural Finance Magnates Singapore Summit 2026, which will bring together brokers, fintechs, banks, EMIs, wealth managers, and hedge funds across APAC.A Market Between Federal and State OversightThe proposal targets one of the fastest-growing segments of prediction markets: sports-related contracts. Platforms such as Kalshi and Polymarket operate under a federal framework, treating these products as financial derivatives. At the same time, they compete with state-licensed sportsbooks such as FanDuel and DraftKings, which are regulated under gambling laws. This overlap has led to conflicting approaches across jurisdictions. State regulators in Nevada and Arizona have challenged the legality of these contracts, with Arizona filing criminal charges against Kalshi. The CFTC, meanwhile, has argued in court that event-based contracts fall under its authority as commodity derivatives. The timing is notable. The bill comes as parts of the industry are moving toward more structured models. Recent agreements involving Major League Baseball, Polymarket and the CFTC have introduced licensed data, contract limits and closer coordination with regulators — steps that bring these markets closer to traditional financial products. What the Bill Would Change The bill would draw a clear line between financial and gambling oversight by removing sports contracts from the CFTC's jurisdiction. If adopted, platforms operating under the federal model would need to either stop offering these contracts or shift to a state-level regulatory framework. For market participants, this would directly affect product availability and the structure and distribution of these contracts. For brokers, the bill introduces a practical question: whether sports-related prediction contracts will remain part of the product mix. It also creates uncertainty around how these products can be offered, in which jurisdictions, and whether existing integration efforts will remain viable. Firms exploring these markets may need to reassess product strategy. This is especially true if regulatory treatment differs across asset types. More broadly, the proposal highlights that regulatory boundaries for event-based contracts are still evolving. Decisions around infrastructure, partnerships, and distribution will depend on how jurisdiction is defined. While the bill focuses on sports, its implications may extend to other categories of prediction markets. If Congress draws a clearer line between financial and non-financial events, similar questions could arise for contracts tied to politics, economics, or corporate outcomes. This article was written by Tanya Chepkova at www.financemagnates.com.

Read full article on FINANCEMAGNETS