US Senator Ted Cruz is preparing legislation that could significantly change how sports-related prediction markets operate across the United States, potentially giving individual states and tribal governments greater authority over these platforms.
The proposal is intended to prevent federally regulated prediction market exchanges from offering sports-related event contracts in jurisdictions where those products are not authorised under local gambling laws.
The development adds another dimension to the growing regulatory debate surrounding companies such as Kalshi, which have expanded their presence in sports-related markets.
States Could Gain Greater Authority Over Sports Contracts
According to details reported by Bloomberg Law, Cruz’s proposed legislation would prevent prediction market platforms from offering event contracts connected to gambling activities, including sports betting, unless they receive authorisation from the relevant state or tribal government.
The approach would seek to address the regulatory overlap between federal financial market oversight and state-level gambling legislation.
Prediction market operators generally argue that their event contracts fall under federal commodities regulation, placing them within the jurisdiction of the Commodity Futures Trading Commission (CFTC).
However, state gambling regulators have increasingly questioned whether sports-related contracts offered through these platforms should be treated as unlicensed sports betting.
Kalshi and Other Platforms Face Growing Regulatory Pressure
Kalshi has become one of the most prominent companies in the US prediction market sector, offering contracts tied to political, economic and sporting outcomes.
Its expansion into sports-related markets has brought the platform into direct competition with traditional sportsbook operators while also attracting increased scrutiny from regulators.
The legal debate centres on whether these products should be classified as financial event contracts or gambling activities subject to state licensing requirements.
Cruz’s proposal would seek to give states a stronger role in determining which sports-related contracts can be offered within their jurisdictions.
Prediction Markets Become a Major Issue for US Sports Betting
The proposal comes amid wider efforts by lawmakers and regulators to establish clearer boundaries for the prediction market industry.
Other legislative initiatives in Congress have considered restricting or prohibiting certain sports and casino-style contracts on federally regulated exchanges.
Cruz’s approach differs by focusing on state and tribal authorisation rather than relying exclusively on a nationwide prohibition.
This distinction could have major implications for platforms seeking to operate across multiple US jurisdictions.
Bill Still Awaiting Formal Introduction
As of 3 November 2026, Cruz’s proposal remains in the preparation stage, with the senator expected to introduce the legislation after the US midterm elections.
It has not yet been enacted, and its eventual wording, legislative support and prospects for passage remain uncertain.
For the sports betting industry, however, the proposal is another indication that prediction markets are becoming a central regulatory issue in the United States.
The coming months could determine whether these platforms continue operating under a predominantly federal framework or face a more fragmented system shaped by individual state gambling laws.