Two questions have plagued sports prediction markets as they've boomed in the U.S.: should event contracts tied to sporting events be treated as sports wagers, and should federal regulators oversee them?
Members of Congress will look for answers to those questions at a hearing Tuesday, where gambling industry lobbyists, a market surveillance expert, and former regulators will testify.
Sports markets have been a major revenue generator and acquisition vehicle for prediction market operators. Kalshi, the largest prediction market in the U.S., added three million new users to its platform over the past month, according to the firm.
Its market on who would win the World Cup generated a record $1.9 billion in trading volume, more than double the volume seen on this year's Super Bowl.
Chris Cylke, a lobbyist for the American Gaming Association who will testify at a Tuesday hearing of the House Agriculture Committee, will take the position that those sports event contracts amount to sports bets and should be regulated as such, according to a copy of his written testimony seen by Barron's. The contracts are regulated at the federal level by the Commodity Futures Trading Commission.
The AGA argued in a May Senate hearing on sports betting that in addition to not being subject to responsible gambling regulations, federally-regulated event contracts don't generate state tax revenue like traditional sportsbooks. They may infringe on tribal sovereignty in states where Native American groups have been awarded monopolies over sports betting, as in Florida. David Bean, the chairman of the Indian Gaming Association and a witness for Tuesday's hearing, will likely testify to that effect.
Another area of concern is consumer protection. Cylke's testimony will note that prediction markets are not required to abide by the sorts of responsible gambling measures required of sportsbooks, such as offering self-exclusion for customers who want to cut themselves off. Sports betting is driving a wave of gambling addiction, as Barron's reported in a 2025 cover story, and prediction markets effectively make sports wagering available nationwide to anyone over the age of 18.
Cylke will also testify that sports event contracts create the same integrity risks as sports bets, but aren't subject to the same integrity-monitoring requirements and regulations as sportsbooks.
In an interview with Barron's ahead of his Tuesday testimony, Solidus Labs CEO Asaf Meir took issue with that idea: "It's like saying that other CFTC-licensed entities, America's largest institutions, don't have good guardrails to monitor the trillions of executed trades per day -- which is obviously false."
Solidus provides integrity monitoring systems to prediction markets like Kalshi. Meir says that in just the second quarter of 2026, Solidus surfaced 120,000 alerts to one of its clients, of which 400 became investigations and two dozen were referred to the CFTC.
Meir believes that the integrity monitoring systems in place on prediction markets are actually "superior" to those on sportsbooks.
"Our tech enables a type of monitoring surveillance that is incredibly sophisticated, and combines otherwise very siloed data feeds, as far as I understand it, in sportsbook monitoring capabilities," Meir said.
Unlike in the recent Senate hearing, there will be no representatives from the prediction market industry in attendance Tuesday. Well-represented, however, will be former lawyers for the CFTC, including one-time general counsel Robert Schwartz and Carl Kennedy, both of whom have since moved into private practice.
They will likely defend the CFTC's right to regulate sports event contracts, as well as the agency's capacity for regulation, which has come under scrutiny following Barron's reporting in February that the CFTC had no enforcement attorneys remaining in its storied Chicago office.
Kennedy brushed aside concerns that the CFTC could not adequately regulate financial products tied to sporting events in an interview with Barron's before his testimony.
"The commission has a long history of adjusting its surveillance capabilities and interpreting its legal authority in a way to apply to new asset classes," he says.
Kennedy was special counsel to a CFTC commissioner during the writing of the 2010 Dodd-Frank regulations, which gave the regulator authority over swaps, a type of derivative contract, and broadly defined them to include swaps that were yet to be created. A decade and a half later, prediction markets and the CFTC are arguing that sports event contracts are swaps -- despite former CFTC chair Gary Gensler's insistence that those contracts go beyond what Dodd-Frank intended.
The debate over whether sports event contracts are financial products or sports bets is ongoing. Lawsuits across the country between prediction markets, the CFTC, and state authorities, are slowly working their way toward the Supreme Court, which will have the final say. Their decision is one of the few outcomes prediction markets haven't tried to predict.
Write to Nick Devor at nicholas.devor@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 21, 2026 02:00 ET (06:00 GMT)
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