Republicans Grill Prediction Markets in Senate Hearing on Sports Integrity
Republicans on the Senate Consumer Protection Subcommittee did not give prediction markets an easy ride during Wednesday’s hearing titled “No Sure Bets: Protecting Sports Integrity in America.” Patrick McHenry, Senior Advisor to The Coalition for Prediction Markets and a former US Representative from North Carolina for 20 years, faced pointed questions from his former colleagues. The session quickly shifted from sports integrity to whether event contracts on sporting events amount to unregulated sports betting.
The tone stood in contrast to a House Agriculture Committee hearing last month that struck a kinder note with CFTC leadership. President Trump has been pro-prediction market during his second term. Yet Senate Republicans including Subcommittee Chair Marsha Blackburn (R-TN), Sen. John Curtis (R-UT) and Commerce Committee Chair Ted Cruz (Texas) pressed hard on regulatory gaps, youth advertising and market design.
McHenry Takes Brunt of It
Marsha Blackburn opened by linking prediction markets to erosion of trust in sports, lack of state regulator oversight, social media ads targeting young people and risks of gambling addiction. The discussion stayed on prediction markets for much of the two-hour session.
Bill Miller, American Gaming Association President & CEO, used his testimony to criticize prediction markets for infringing on the regulated gambling industry. John Hickenlooper (D-CO) highlighted a Kalshi social media campaign featuring a young woman who said she could not pay rent until she began trading on the platform.
Hickenlooper asked McHenry whether it was responsible to present prediction markets as a solution for people struggling with rent on what is often a random outcome. McHenry replied that event contracts are not fully random and that he was unaware of the ad.
John Curtis pressed for a basic definition of prediction markets, then observed that in a swap someone wins and someone loses. That description sounded a lot like gambling. McHenry answered that farmers can use these markets to hedge against a poor crop season. Curtis interrupted to question how that differed from betting at a sportsbook or casino.
Patrick McHenry responded that the business models are fundamentally different from a sportsbook. A sportsbook sets lines and profits when customers lose. An exchange earns a fee from trades between participants.
Economic Consequence of Sports
The core regulatory defense for prediction markets is that event contracts let users hedge against economic conditions. Linking a team win or loss to measurable economic impact is straightforward. Connecting a single pitch or strike to the same logic is harder.
Ted Cruz asked whether the scenario Congress worried about during Dodd-Frank debates had arrived. He quoted the CFTC position that sports event contracts qualify as swaps under the Commodity Exchange Act because sports outcomes carry economic consequences. He then posed a direct challenge.
“The CFTC argues that sports event contracts fit the Commodity Exchange Act’s definition of a swap because sports outcomes have economic consequences. But what is the economic consequence of say whether a pitcher will throw a ball or a strike?”
McHenry answered that it is up to the consumers to decide what constitutes a swap under the broad definition written in Dodd-Frank. He added that it will be for the courts and the Congress to decide whether or not they like that. The Coalition welcomes Congress’s input and the rulemaking of the CFTC on these definitions.
Micro Betting a Threat to Integrity
Senators and witnesses showed near agreement on one point. Prop bets and micro bets create the largest integrity risks in sports wagering. Marsha Blackburn cited high-profile match-fixing examples in the NBA and MLB that undermine public trust.
Scott Sadin, Integrity Compliance 360 CEO, gave the clearest testimony on manipulation risks. In response to a question from Sen. Brian Schatz (D-HI), Sadin identified player props, micro betting, in-game markets and situations where an individual has outsized impact as the most vulnerable categories.
Sadin stated he would still be a strong proponent of wrapping regulation around those types of markets as opposed to pushing that activity offshore. Bill Miller agreed with Ted Cruz that if a league flags a bet as an integrity risk the sportsbook should not offer it.
Prediction market platforms position themselves as different. Patrick McHenry stressed that coalition members do not offer micro bets particularly vulnerable to manipulation such as wagers on the next pitch or the next play. He pointed out that recent sports integrity scandals involving NBA and MLB players using insider information occurred on traditional online sportsbooks, not on prediction markets exchanges.
Risk and Counterarguments
The hearing exposed clear limitations in the prediction market defense. Claims that event contracts are not fully random or that users alone decide the boundary between swap and bet invite skepticism. The Kalshi rent-to-riches ad gave critics a ready example of questionable marketing that targets exactly the demographic senators want to protect.
Republicans who smiled at welcoming McHenry back as a former colleague still refused to grant him a pass. The bipartisan flavor of the criticism matters. Even witnesses from the regulated gaming side used the platform to draw sharper lines between licensed sportsbooks and prediction platforms operating outside state oversight.
The absence of major operators like DraftKings or FanDuel on the witness list drew notice inside the sports betting community. Their perspective on integrity safeguards and practical regulation could have added balance. The late addition of Dr. Harry Levant, Director of Gambling Policy at the Public Health Advocacy Institute, created its own distraction after past felony convictions tied to a gambling-related theft of approximately $2 million from 12 clients resurfaced.
The Bottom Line
Senate Republicans signaled that prediction markets will not receive a free regulatory pass despite support from the House, the CFTC and the White House. The operational reality is clear. When micro markets on individual player actions sit alongside claims of economic hedging, lawmakers see sports betting with different branding. Prediction market operators now face heightened scrutiny on advertising, contract definitions and integrity partnerships with leagues. The next moves on CFTC rulemaking, potential legislation and the New Jersey case against Kalshi headed toward the Supreme Court will decide whether the current model survives or requires tighter alignment with existing sportsbook rules. After eighteen years on bookmaker trading floors the pattern is familiar. Markets that look too much like bets eventually get regulated like them.
