Cruz Bill Would Require State or Tribal Approval for Sports Contracts — a Bipartisan Legislative Threat Emerges
Senator Ted Cruz, who chairs the Senate Commerce Committee, is preparing a bill that would bar federally regulated prediction markets from offering gambling-tied event contracts, including sports, unless a state or tribal government authorises them. It would not ban the contracts nationwide but would require platforms to obtain approval jurisdiction by jurisdiction, resembling state-by-state sportsbook regulation. The proposal arrives as Democrats take control of both chambers after the midterms, creating a potential bipartisan reckoning for a sector that had relied on federal protection.
Senator Ted Cruz, chair of the Senate Commerce Committee, is preparing legislation that would require federally regulated prediction markets to obtain state or tribal authorisation before offering event contracts tied to gambling, including sports betting. The measure, described as a proposal Cruz intends to introduce after the November 3 midterms, would not impose a nationwide ban. Instead it would condition the platforms' ability to offer those contracts on approval from each state or tribal jurisdiction where they operate — importing the state-by-state licensing model that governs conventional sportsbooks into the prediction market sector. Cruz has said there is 'serious disagreement' about whether the CFTC can unilaterally permit sports event contracts under the Commodity Exchange Act, and at a May hearing he called them sports bets.
For UK readers, this is roughly equivalent to a senior governing-party committee chair proposing that a financial regulator's nationwide authorisation be overridden by a requirement to obtain separate gambling licences in each region — siding with regional regulators over the central one despite his own party controlling the centre. The significance lies in where it comes from. The sector has relied heavily on federal protection in 2026: the CFTC has defended the platforms, sued states, and moved to classify event contracts as swaps, and the sector's political connections run toward the current Republican administration. A restrictive bill from a senior Republican committee chair signals that federal support is not uniform within the party. Cruz's jurisdictional argument aligns him more with the state attorneys general and the NFL than with the CFTC.
The timing compounds the threat. The midterms delivered Democratic control of both chambers, and Democratic legislators have generally been more sceptical of prediction market deregulation, with several Democratic attorneys general among the most aggressive state enforcers. A Democratic Congress from January 2027 raises the probability that restrictive legislation advances, and the Cruz proposal shows the restrictive impulse is not confined to one party. Reporting has framed the post-midterm environment as a potential 'bipartisan reckoning': a Republican committee chair proposing state-approval requirements, a Democratic majority inclined toward tighter regulation, and a separate bipartisan measure — the Prediction Markets Are Gambling Act, introduced in March — already on the table. At least 15 state legislatures had proposed prediction market bills as of September.
Whether any of this becomes law is uncertain, and the Cruz bill's prospects specifically are unclear. The CLARITY Act's failure in September showed comprehensive digital-asset legislation is hard to pass even with Republican support, and a narrower prediction market bill faces its own obstacles in a divided Congress. But the legislative threat has changed in character. For most of 2026 the sector's risk was concentrated in the courts and state enforcement, with Congress largely absent after the CLARITY Act collapsed. The Cruz proposal and the Democratic takeover reintroduce Congress as a potential source of restriction, at a moment when the platforms are already defending themselves at the Supreme Court, against ten-plus states, and against a Pentagon ban and criminal charges in Utah. A federal statute requiring state-by-state approval would, if enacted, resolve the preemption fight against the platforms by legislative fiat — rendering the CFTC's jurisdictional claims moot and subjecting the sector to the state-level regulation it has spent 2026 fighting to avoid. That outcome is far from certain, but it is now a live possibility in a way it was not before the midterms.
Operators mentioned in this article
Recent updates
Kalshi's Parlays Drive Back-to-Back $5B Days — and Hand Critics Their Strongest Argument
Kalshi traded a record $5.33 billion on November 7 and $5.36 billion on November 8, with multi-leg parlay-style 'combos' making up roughly 75% of both days' volume. Its 30-day volume topped $100 billion. But the parlay dominance cuts against the platform's legal defence: parlays are a quintessential sportsbook product, and the American Gaming Association has told the Second Circuit that parlays make up about two-thirds of Kalshi's volume and should be treated as sports bets. The implied house edge on 10-plus-leg combos is around 25%, undercutting the argument that these are neutral financial instruments rather than gambling.
CFTC Tells Platforms to Stop Geofencing States — Directly Colliding With State Court Orders
The CFTC issued an interpretation on November 5 of its 'impartial access' core principle, telling regulated exchanges including Kalshi and Polymarket to drop state-by-state geographic blocks within 30 days or explain why they cannot. The demand collides head-on with existing state court orders requiring the platforms to geofence: Washington ordered Kalshi to geofence in August, and Michigan ordered it to use licensed geolocation to block the state in September, with a $500,000 daily fine for violations. Chairman Michael Selig framed the interpretation as a uniformity requirement. The platforms are now caught between a federal demand to unblock states and state court orders to block them.
The Verdict on the 'First Prediction-Market Election': Markets Called the Democratic Sweep but Underestimated It
Democrats won control of both chambers of Congress in the November 3 midterms, an outcome Kalshi and Polymarket had priced as the favourite. Both platforms claimed roughly 98% directional accuracy across resolved races. But the headline figures carry caveats: much of that accuracy came from non-competitive races, independent reviewers judged the markets roughly comparable to conventional forecasts, and analysts noted the markets underestimated the size of the Democratic wave. The New York Times found prediction markets fared about the same as election forecasts; one economist gave them a 'B.' Kalshi's midterm volume reached $2.5 billion, nearly double the 2024 cycle.