What Democratic Control of Congress Could Mean for Prediction Markets

The mid-term elections gave Democrats control of the House of Representatives and the Senate at the federal level. Gambling issues were not directly on the ballot in most states, but according to Legal Sports Report, the new balance of power could affect the fast-growing prediction market industry. Operators such as Kalshi and Polymarket have been offeringОфферAn offer is an advertiser's proposal to partners: the product together with payout terms, geos, and traffic requirements, for which the partner receives a reward. event contracts on sports since 2025 and have spent the last two years in disputes with states whose regulators consider these products a violation of local gambling laws.

Where the dispute stands

The companies argue that their contracts differ from traditional betting and are regulated only at the federal level by the Commodity FuturesФьючерсыA futures contract is a standardized exchange-traded contract to buy or sell an asset at a price agreed in advance, on a set date in the future. Trading Commission (CFTC). The agency supports this position, and the Trump administration has been a strong supporter of the industry's growth. In September, New Jersey Attorney General Jennifer Davenport asked the Supreme Court to take up the question of whether states can regulate sports offerings on these platforms. The request followed two appeals court rulings: the Third Circuit ruled 2-1 against New Jersey in April, and the Ninth Circuit recently ruled unanimously, 3-0, in favor of Nevada in a case involving Kalshi. Legal experts say the uncertainty makes a Supreme Court hearing likely. New Jersey's appeal asks whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempts states from regulating sports event contracts.

What experts expect

Bob Jarvis, a law professor at Nova Southeastern University who specializes in gaming, believes the Supreme Court will likely take the case and eventually side with the states. In his view, the election outcome could have influenced the Court's attention to the case, but not the result. Sports attorney Daniel Wallach takes a harsher view. He expects a Democratic-led Congress to take a closer look at an industry that has grown rapidly under the Trump administration, and he points to possible hearings, investigations and pressure on the CFTC. Wallach also notes that CFTC Chairman Mike Selig previously represented the venture capital firm Paradigm, which later invested in Kalshi. At the state level, Wallach sees new fronts: he says Texas and Georgia have elected Democratic governors and attorneys general, and Iowa may shift its position, since the current attorney general defended Kalshi in court while saying she had no intention of starting enforcement proceedings.

Bills and the White House stance

Legislative initiatives are coming from both sides. In March, Senator John Curtis (R-UT) introduced the Prediction Markets Are Gambling Act, which is co-sponsored by Senator Adam Schiff (D-CA) and would ban sports event contracts and similar gambling-like markets. In January, Representative Ritchie Torres (D-NY) proposed barring federal employees from using prediction markets over insider trading concerns. Gaming law expert Nelson Rose believes the president, whose son Donald Trump Jr. has investments in Kalshi and Polymarket, would veto laws restricting these platforms, and that the Supreme Court could ultimately decide the matter. Industry leadersЛидLead — a contact or sign-up from a potential customer, collected through an offer form: phone number, email, or registration. The base unit of payment in the CPL model. stress the forecasting accuracy of their platforms: Polymarket CEO Shayne Coplan pointed to markets pricing Democrats' chances of winning the House at 92%.