Kalshi has fueled a billion-dollar dispute over sports betting regulation as commercial activity on its platforms continues to increase.
Summary
- Gaming and tribal groups have urged the Senate to block sports-related prediction contracts through the CLARITY Act.
- The American Gaming Association estimates that prediction markets have cost states about $1.08 billion in tax revenue.
- Kalshi’s crypto perpetual futures platform generated over $5.5 billion in volume within two weeks of its launch.
According to a report from Semafor, a coalition that includes the Indian Gaming Association, the American Gaming Association and labor organizations has urged the U.S. Senate to add language to the CLARITY Act explicitly preventing sports and casino-style event contracts from being offered through prediction market platforms.
In a letter to lawmakers, the groups argued that sports betting should remain outside the jurisdiction of the Commodity Futures Trading Commission and continue to be governed by existing state and tribal regulatory systems.
The coalition said prediction markets have enabled what it describes as the largest expansion of gambling in U.S. history over the past 18 months without direct legislative approval.
The dispute arises as Kalshi continues to expand beyond its initial prediction market business.
Earlier this week, the company revealed that its perpetual futures products generated more than $5.5 billion in trading volume within two weeks of their launch. The platform currently offers 11 crypto-related perpetual futures contracts and is discussing additional products with regulators.
Gaming groups challenge federal oversight of sports contracts
Pressure from gaming organizations is increasingly focused on the CFTC’s position that prediction markets fall under federal commodity regulation. Under the leadership of Michael Selig, the agency has supported platforms such as Kalshi and Polymarket in legal disputes involving national gaming regulators.
In their letter, the organizations argued that the CFTC was created to oversee commodity and derivatives markets rather than sports betting. They argued that the agency lacks the operational framework and expertise to regulate sports betting nationally, particularly in areas where state and tribal authorities already provide oversight.
Financial concerns are also part of the debate. Data cited by the American Gaming Association estimates that state gambling authorities have lost about $1.08 billion in tax revenue since prediction market platforms began offering contracts for sports-related events.
Meanwhile, lawmakers continue to negotiate the final form of the CLARITY Act, legislation designed to transfer some digital asset regulatory authority from the Securities and Exchange Commission to the CFTC. Although the bill was passed by the House of Representatives in July 2025, discussions over stable yield products, ethical provisions, and symbolic actions delayed final approval.
Kalshi Expands Crypto Derivatives Despite Legal Uncertainty
As the political struggle intensifies, Kalshi continues to add products related to digital assets. Following regulatory approval of its BTCPERP contract on May 29, the company launched CFTC-approved Bitcoin perpetual futures contracts in the United States and later expanded to XRP and Solana contracts.
The contracts allow traders to hold positions without an expiration date while using funding payments designed to keep prices aligned with underlying spot markets. Although the structure can support continued trading activity, leverage can magnify losses during periods of high market volatility.
Additional filings involving Dogecoin, Shiba Inu, Stellar, Hedera, and Hyperliquid’s HYPE token have also progressed through regulatory review processes, indicating that Kalshi’s crypto derivatives lineup may continue to grow.
Legal observers cited in the Semafor report say the conflict between federal and state regulators could ultimately reach the U.S. Supreme Court.
This possibility arises from competing interpretations of the court’s 2018 decision Murphy v. National Collegiate Athletic Association, which gave states authority over sports gambling, while Kalshi, Polymarket and the CFTC argue that event contracts offered on prediction market platforms are considered swaps subject to federal oversight.
