Prediction Markets Fuel Washington Lobbying Fight

The fight over prediction markets has expanded far beyond trading platforms and regulators. It is now being waged across Capitol Hill, where companies behind event-contract exchanges and their opponents in the gambling industry are pouring increasingly large sums into lobbying as lawmakers debate how these markets should be regulated.

Read more Blaize Talagi opens up on Panthers future ahead of Eels homecoming: ‘We’ll see what happens’

New federal lobbying disclosures show Kalshi dramatically increased its Washington presence during the first half of 2026. The company reported spending $990,000 directly on lobbying during the six-month period, while its overall federal advocacy bill climbs to nearly $1.8 million after accounting for outside lobbying firms. That already exceeds the roughly $1 million Kalshi spent during all of 2025 and represents its largest lobbying push since entering the political arena.

The casino and gaming industry, however, is matching that effort rather than retreating.

The American Gaming Association has spent $1.39 million on lobbying so far this year. Including outside firms, its federal advocacy costs approach $1.8 million, roughly 30% higher than during the same period in 2025. Cherokee Nation, which operates casino and gaming businesses, has also increased its activity, reporting $600,000 in lobbying expenditures during the first half of the year.

Kalshi’s chief competitor, Polymarket, remains a much smaller player in Washington. A single lobbying firm representing the company reported $180,000 in spending during the first six months of 2026, putting it on track to roughly match last year’s $360,000 total. By contrast, Kalshi now relies on seven lobbying operations, including an in-house government affairs team.

Lobbying battle intensifies

The spending surge comes as prediction markets face one of their most politically difficult periods.

Questions surrounding insider trading intensified after traders placed positions ahead of U.S. military actions involving Venezuela and Iran. More recently, reporting from The Wall Street Journal examined wagers that may have relied on confidential political information. Separately, a teleprompter operator working for President Donald Trump was suspended after investigators began examining trades allegedly made on Kalshi using material, nonpublic information.

Both Kalshi and Polymarket maintain they have strengthened safeguards designed to detect and prevent insider trading. Even so, lawmakers have broadened their concerns beyond market integrity to include contracts tied to sports, elections and government actions.

Winning over lawmakers

Kalshi has responded by expanding its political relationships. The company has recruited former officials from the Obama and Biden administrations for government affairs work while also employing Donald Trump Jr. as a paid adviser. Chief executive Tarek Mansour recently appeared at the Capitol alongside Democratic Representative Josh Gottheimer of New Jersey to support legislation focused on protecting children from online gambling.

Supporters of prediction markets argue they are still newcomers competing against an industry with decades of political influence. Patrick McHenry, the former Republican congressman who now serves as senior adviser to the Coalition for Prediction Markets, said casino operators built much of the existing policy infrastructure in both Congress and state governments long before prediction exchanges emerged, although he believes the newer companies are steadily improving their relationships with lawmakers. Kalshi declined to comment directly and referred questions to McHenry.

The regulatory divide

Congress has responded to the controversy with multiple legislative proposals targeting insider trading and seeking to limit event contracts involving sports, elections and military conflicts. Sports contracts remain the largest category traded on prediction platforms.

Read more Commonwealth Games medal tracker 2026: Updated standings, results and full Glasgow schedule

Prediction market operators argue sports contracts function as financial swaps comparable to derivatives tied to commodities such as gold or agricultural products, placing them under the authority of the Commodity Futures Trading Commission. Their critics counter that the contracts are effectively sports betting and therefore belong under state gambling regulations.

That disagreement surfaced during Senate Commerce Committee hearings earlier this year, where members from both parties questioned whether sports event contracts differ meaningfully from gambling. A more measured approach emerged this week during a House Agriculture Committee subcommittee hearing. Representative Dusty Johnson, Republican of South Dakota, acknowledged that many Americans view the products as indistinguishable from sports betting while others see them as legitimate financial instruments that aggregate information. He suggested the central issue is whether existing laws and regulators are equipped to distinguish between the two, while emphasizing that the CFTC is not a gambling regulator.

Attention shifts to regulators

Despite the growing attention, major legislation appears unlikely before Congress turns its full attention to the November elections.

Instead, industry participants are watching for the possibility that narrower provisions affecting prediction markets could be attached to broader legislative packages before lawmakers adjourn for the year.

Policy analysts continue to view the Commodity Futures Trading Commission as the institution most likely to shape the industry’s immediate future. The agency released a proposed rule governing prediction markets in June and is currently accepting public comments before deciding how to proceed.

TD Cowen policy analyst Jaret Seiberg believes the absence of congressional action currently favors the exchanges. From the industry’s perspective, maintaining the status quo is preferable to legislation that could impose new restrictions, making congressional inaction a strategic advantage for prediction market operators.

Insider trading probe continues

Congressional scrutiny has not disappeared, however.

House Oversight and Reform Committee Chairman James Comer continues to oversee an investigation into how prediction platforms police insider trading. A person familiar with the committee’s work said Kalshi and Polymarket received notably different receptions during recent briefings. According to that individual, Kalshi’s presentation was viewed positively, while committee members questioned Polymarket after the company sent outside legal counsel rather than company representatives.

Polymarket said the decision resulted from a misunderstanding and stressed that it intends to continue cooperating fully with the committee’s investigation.

Kalshi was also expected to brief investigators about trades placed by Trump’s former teleprompter operator in so-called mention markets, contracts allowing traders to speculate on whether specific words will be spoken during speeches or public appearances. According to the person familiar with the investigation, the company planned to explain how its internal compliance systems detected the trades involving material, nonpublic information.

For now, the industry’s biggest contest may not be on its trading platforms but in Washington itself, where prediction exchanges and established gambling interests are investing heavily to influence the rules that will determine how these rapidly growing markets evolve.

Read more DEGEN Studios brings its full catalogue and upcoming releases to Superbet

Source: cnbc.com