Kalshi has ignited a billion-dollar discussion on the regulation of sports betting as its trading activities gain momentum on its platforms.
Summary
- Gaming and tribal organizations are urging the Senate to veto sports-related prediction contracts through the CLARITY Act.
- The American Gaming Association estimates that prediction markets have led to approximately $1.08 billion in lost tax revenues for states.
- Kalshi’s crypto perpetual futures platform achieved over $5.5 billion in trading volume just two weeks post-launch.
According to a report by Semafor, a coalition formed by the Indian Gaming Association, the American Gaming Association, and labor groups has urged the US Senate to revise the CLARITY Act to explicitly bar sports and casino-style event contracts from being accessible on prediction market platforms.
In their correspondence to lawmakers, these organizations stressed that sports betting should not be regulated by the Commodity Futures Trading Commission and should adhere to existing state and tribal regulatory frameworks.
The coalition pointed out that prediction markets have enabled what they term the largest gambling expansion in US history over the last 18 months without any direct legislative approval.
This contention arises as Kalshi continues to broaden its scope beyond its original prediction market services.
Recently, the company disclosed that its perpetual futures offerings generated over $5.5 billion in trading volume within a mere two weeks of their launch. The platform currently showcases 11 crypto-linked perpetual futures contracts and is in talks with regulators to introduce additional products.
Gaming groups challenge federal oversight of sports contracts
Increasing pressure from gaming associations has focused on the CFTC’s position that prediction markets fall under federal commodities regulation. Under Chair Michael Selig, the agency has supported platforms like Kalshi and Polymarket in legal disputes with state gaming regulators.
In their letter, these organizations argued that the CFTC was established to supervise commodities and derivatives markets—not sports wagering. They maintained that the agency lacks the requisite framework and expertise to effectively regulate sports betting nationally, particularly in sectors already monitored by state and tribal authorities.
Financial considerations have also come to the forefront of this discussion. The American Gaming Association has reported that state gaming authorities have incurred an estimated loss of around $1.08 billion in tax revenues since the inception of sports-related event contracts on prediction market platforms.
Meanwhile, lawmakers are still fine-tuning the final details of the CLARITY Act, which intends to shift portions of digital asset regulatory authority from the Securities and Exchange Commission to the CFTC. While the bill passed the House of Representatives in July 2025, ongoing negotiations regarding stablecoin yield products, ethical provisions, and tokenized equities have postponed final agreement.
Kalshi expands crypto derivatives despite legal uncertainty
As political tensions rise, Kalshi has continued to broaden its digital asset product offerings. After receiving regulatory clearance for its BTCPERP contract on May 29, the company introduced CFTC-approved Bitcoin perpetual futures in the United States and subsequently expanded to include XRP and Solana contracts.
These contracts enable traders to maintain positions indefinitely, utilizing funding payments designed to align prices with underlying spot markets. While this framework may facilitate continuous trading, leverage could amplify losses during turbulent market conditions.
Further filings for Dogecoin, Shiba Inu, Stellar, Hedera, and Hyperliquid’s HYPE token are also advancing through the regulatory review, indicating that Kalshi’s crypto derivatives portfolio may continue to grow.
Legal analysts mentioned in the Semafor report anticipate that the conflict between federal and state regulators could eventually escalate to the U.S. Supreme Court.
This potential arises due to differing interpretations of the 2018 Murphy v. National Collegiate Athletic Association ruling, which granted states control over sports gambling. In contrast, Kalshi, Polymarket, and the CFTC argue that event contracts available on prediction market platforms are categorized as swaps and thus fall under federal oversight.
