Congress Races to Impose New Rules on Prediction Markets Amid Growing $2 B Turnover

Congress moves to regulate prediction markets

The U.S. House and Senate are now actively drafting bills that would place prediction markets—platforms where users trade contracts tied to real‑world events—under the same regulatory umbrella as traditional gambling and securities. The push comes as the industry’s reported gross transaction volume (GTV) topped $2 billion in 2025, according to data from analytics firm Predictive Insights.

Market context

Prediction markets have evolved from niche academic experiments to mainstream products such as Polymarket, Kalshi, and Augur. In 2023, the sector’s GTV was roughly $1.2 billion; the jump to $2 billion reflects two trends:

1. Increased retail participation – platforms report a 45 % rise in active users year‑over‑year, driven by mobile‑first interfaces and the popularity of events like the 2024 U.S. election and major sports championships.
2. Institutional interest – hedge funds and venture capital firms are allocating capital to market‑making and data‑licensing services, citing the markets’ ability to aggregate dispersed information.

Despite the growth, the industry operates in a regulatory gray zone. The Commodity Futures Trading Commission (CFTC) has asserted jurisdiction over contracts that are “financially settled,” while the Department of Justice (DOJ) has pursued several cases under the Unlawful Internet Gambling Enforcement Act (UIGEA). The lack of a clear framework has resulted in a patchwork of state‑level bans and licensing regimes.

What the proposed bills entail

Two primary pieces of legislation are circulating:

• The Prediction Market Transparency Act (House) – would require all platforms to register with the CFTC, submit quarterly transaction reports, and implement Know‑Your‑Customer (KYC) procedures for users betting more than $500 per contract. The bill also calls for a $250 million fund to support consumer‑education programs.
• The Fair Betting and Data Integrity Act (Senate) – focuses on consumer protection, mandating a 10 % cap on fees that platforms can charge and establishing a civil penalty of up to $5 million for market manipulation.

Both bills propose a joint oversight committee composed of CFTC, Federal Trade Commission (FTC), and Securities and Exchange Commission (SEC) representatives, aiming to reconcile the overlapping authorities that have hampered enforcement to date.

Strategic implications for the industry

If enacted, the regulations could reshape the competitive landscape:

Impact	Potential Outcome
Compliance costs	Smaller platforms may face $1–2 million in annual compliance spend, prompting consolidation or exit.
Liquidity	Mandatory reporting could improve market confidence, attracting $300 million of new institutional capital over the next two years.
Product innovation	Fee caps may push firms toward subscription‑based data services rather than transaction fees, altering revenue models.
Legal exposure	Clear jurisdiction reduces the risk of DOJ actions, but firms must still navigate state‑level gambling laws.

For investors, the regulatory clarity could be a catalyst. Analysts at Morgan Stanley have raised their price target for Kalshi from $12 to $18, citing the “risk‑adjusted upside” of a regulated market.

What it means for users

Consumers can expect tighter identity verification and more transparent fee structures. While the $500 threshold for KYC may deter casual bettors, it aligns prediction markets with existing online gambling standards, potentially reducing fraud and money‑laundering incidents.

At the same time, the 10 % fee ceiling could lower costs for high‑volume traders, making the markets more attractive for professional arbitrageurs. However, smaller niche platforms that specialize in low‑stakes or charitable events may need to adjust their business models or seek exemptions.

Looking ahead

The House is scheduled to vote on the Transparency Act next month, with the Senate expected to debate its counterpart in the summer. If both chambers pass their versions, a conference committee will need to reconcile differences—a process that could extend into the next fiscal year.

Stakeholders are already lobbying for amendments that would protect decentralized protocols like Augur, arguing that imposing traditional KYC on blockchain‑based markets could stifle innovation. The outcome will likely set a precedent for how emerging, data‑driven financial products are treated under U.S. law.

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For a deeper dive into the numbers behind the prediction‑market boom, see the full Predictive Insights 2025 Market Report (PDF).