Prediction Markets: BETS OFF Tests Jurisdiction

Setting the scene: a narrow, contested extension of the sportsbook

iGaming Review’s previous Prediction Markets coverage has framed event contracts as a narrow, regulation‑sensitive extension of the sportsbook rather than a replacement for core sports betting or casino products. Late‑2025 pieces highlighted two tensions: operators experimenting at the edges of what regulators would permit, and analysts warning that regulatory clarity would decide whether prediction products stay niche or have room to grow.

Since then, that tension has become more visible. Federal courts, state regulators and federal policymakers are all testing where sports‑based event contracts and political or security‑related markets sit – under derivatives law, gambling law, or outside both. The answer will determine whether prediction platforms are treated primarily as derivatives exchanges, as gambling operators, or as something that fits awkwardly between the two.

Point 1 – BETS OFF: drawing a hard line on “immoral” markets

In mid‑March, Senator Chris Murphy and Representative Greg Casar introduced the Banning Event Trading on Sensitive Operations and Federal Functions (BETS OFF) Act. The bill would prohibit prediction markets from listing contracts on terrorism, war, assassination, non‑financial government actions and any event where an individual knows or can control the outcome. Sponsors and allied advocacy groups portray these contracts as national‑security risks and a “perverse incentive” for insiders who might profit from events they influence.

For most licensed sportsbooks, BETS OFF would not immediately change product menus; major operators already avoid war‑ and terrorism‑linked markets and treat election betting cautiously where it is permitted at all. Its importance is more symbolic. By explicitly grouping certain prediction contracts with unacceptable forms of gambling, the bill seeks to align what is off‑limits in casinos and regulated sportsbooks with what should be off‑limits on derivatives‑style event‑contract platforms.
BETS OFF also sits alongside other prediction‑market proposals, including bills aimed at restricting public officials’ trading and tightening disclosure rules. Taken together, they signal that at least some members of Congress are prepared to treat prediction markets as a policy problem in their own right, even if the legislative path is far from clear.

A Las Vegas sportsbook with wall‑to‑wall odds boards and live sports screens, illustrating how prediction‑style products extend the traditional betting floor.© SvetlanaSF / Alamy.

Point 2 – CFTC vs states: who regulates what?

Alongside the political debate, 2026 has brought a sharper jurisdictional contest between the CFTC and individual states over who regulates prediction markets on a day-to-day basis. On 5 February, the CFTC formally withdrew its June 2024 “Event Contracts” notice of proposed rulemaking and a related sports‑events staff advisory, saying that a different approach was needed as products and platforms evolved.
In March, the Commission issued an Advanced Notice of Proposed Rulemaking (ANPRM) on event‑contract derivatives, explicitly referencing prediction markets and seeking input on which types of contracts may be contrary to the public interest, how to handle sports and political events, and how to manage manipulation and margin risk. The CFTC’s Division of Market Oversight also released a staff advisory, giving fresh guidance to designated contract markets on listing, monitoring and enforcing rules around event contracts.

At the same time, the CFTC has filed briefs in litigation asserting its “exclusive jurisdiction” over prediction‑market platforms when their products are structured as swaps or futures listed on a designated contract market. Platforms such as Kalshi have relied on that stance in their disputes with states over sports‑ and politics‑linked contracts.

Several states take a different view. Regulators and attorneys‑general in Nevada and Massachusetts have argued that many sports‑related event contracts look and function like unlicensed sports betting, and have acted to restrict or challenge such products under state gambling law. In Tennessee, by contrast, a federal court recently granted Kalshi a preliminary injunction, finding that its sports contracts are likely within the CFTC’s jurisdiction and therefore preempt conflicting state prohibitions.

For sportsbooks, this unresolved split creates legal and operational risk. Operators that integrate prediction‑market contracts or consider launching their own CFTC‑aligned platforms must now assume that identical products could attract very different regulatory responses across states and forums. That uncertainty may discourage more ambitious experiments until the CFTC’s rule-making has progressed further and courts provide clearer guidance.

Digital scales of justice on a tablet screen, symbolising regulators weighing new rules for online prediction markets.

Point 3 – A brief global view from the iGaming lens

Outside the US, prediction markets remain small but closely watched. In early 2026, the UK Gambling Commission signalled that prediction markets offered to British consumers are likely to be treated as gambling products – often authorised as betting‑intermediary or pool‑betting services – rather than as financial instruments. European regulators more broadly continue to focus on licensing, AML and consumer protection, with prediction‑style products generally fitting into existing gambling or investment categories rather than driving new ones.

In that context, US debates are more likely to serve as a reference point than a template. Regulators in Europe and Latin America may cite CFTC rulemaking, state‑federal disputes and bills such as BETS OFF when they clarify their own positions on sports‑linked and politically sensitive prediction products, but local politics and existing legal frameworks will ultimately shape their decisions. For global iGaming executives, the near‑term priority is to track how US lines between derivatives and gambling are drawn, and then map those lessons carefully onto each jurisdiction rather than assuming a single “global model” will emerge.

Industry implications: scenarios, not forecasts

Given how early the US process still is, the safest way to frame industry implications is as scenarios rather than predictions:
– Operators with US exposure may choose a conservative path, focusing on sports and entertainment contracts that clearly sit within either CFTC or state gambling frameworks and steering clear of categories that could fall under BETS OFF‑style restrictions or future CFTC rules

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– Suppliers of data, risk‑management and trading technology to prediction platforms could see demand diverge depending on whether courts and regulators ultimately lean toward a derivatives‑first or gambling‑first model in key US markets.

– For regulators and policymakers, the US debate may become a useful reference point; how much weight it carries will depend on local politics, existing gambling and securities frameworks, and the perceived benefits or harms of prediction markets in each jurisdiction.

Further Reading & Key Sources