The US House Agriculture Committee has scheduled a hearing on sports prediction markets as two gaming associations press Congress to prohibit sports contracts offered by platforms including Kalshi and Polymarket.
Summary
- US lawmakers will examine sports prediction markets amid pressure to prohibit sports contracts.
- Gaming associations argue Kalshi and Polymarket offer products resembling traditional sports betting.
- Hyperliquid plans permissionless HIP-4 outcome markets using validator-approved onchain templates.
According to a committee release, the Subcommittee on Commodity Markets, Digital Assets, and Rural Development will examine customer protections and market integrity across prediction markets. Legal specialists and executives representing the American Gaming Association and Indian Gaming Association are expected to testify.
The hearing comes as state authorities challenge whether sports event contracts qualify as federally regulated derivatives or unlicensed gambling products. Kalshi and Polymarket have faced claims from regulators that their sports markets resemble conventional betting services, despite operating within the prediction-market sector.
At the federal level, prediction-market supporters maintain that the Commodity Futures Trading Commission already possesses enough authority to oversee event contracts. Gaming associations, however, want lawmakers to prevent regulated exchanges from offering contracts based on sporting events.
Gaming groups want sports contracts prohibited
Legal expert Daniel Wallach, who reviewed the witnesses’ prepared testimony, noted that supporters of prediction markets are asking Congress not to pass new legislation clarifying the CFTC’s authority. According to Wallach, those witnesses believe the existing legal framework already allows the regulator to supervise platforms such as Polymarket.
Robert Schwartz, one of the witnesses supporting prediction markets, argued that the CFTC can decide which event contracts exchanges may list without receiving new powers from Congress.
“It has powerful authority to disallow exchanges from listing problematic contracts,” Schwartz said.
Drawing on the Dodd-Frank Act, Wallach argued that the CFTC can prohibit an exchange from listing a contract involving gaming when the agency determines that the product conflicts with the public interest. His interpretation places responsibility for approving or rejecting sports contracts with the federal derivatives regulator rather than state gambling authorities.
Gaming representatives have challenged that position. David Bean, chairman of the Indian Gaming Association, argued that Kalshi is bypassing gambling laws by offering products that mirror traditional sports wagers. Bean’s testimony treats the economic function of the contracts, rather than their classification as derivatives, as the central issue.
According to Bean, the CFTC’s proposed rule would turn federally regulated derivatives exchanges into nationwide online gambling platforms. The American Gaming Association and Indian Gaming Association are therefore seeking a ban on sports contracts instead of relying solely on the CFTC to assess individual products.
State-level enforcement has added urgency to the dispute. As previously reported by crypto.news, France’s gaming regulator blocked access to Polymarket after accusing the platform of providing illegal gambling services. The regulator also classified the alleged violation as a criminal offence carrying a financial penalty.
A US court ruling has created another obstacle for the sector. Judge Analisa Torres ruled that New York gambling laws apply to Kalshi’s sports-related event contracts. The decision challenged arguments that such products fall only within the CFTC’s federal jurisdiction and are therefore beyond state gambling controls.
Although the ruling directly concerned Kalshi, the report identified possible consequences for Polymarket and other platforms offering comparable event contracts. Under the court’s approach, federal commodities oversight would not automatically prevent states from applying their gambling laws to sports markets.
The House hearing will place those competing legal positions before lawmakers. Prediction-market supporters are expected to defend the CFTC’s existing power to reject harmful contracts, while gaming representatives will argue that sports products should not be permitted on federally regulated exchanges in the first place.
Outcome markets are expanding beyond sports
While lawmakers consider restrictions on sports contracts, Hyperliquid is preparing to let users create outcome markets through its HIP-4 system. As reported by crypto.news, the decentralized exchange has announced that permissionless deployment will begin on testnet before a planned mainnet release.
In a Sunday Telegram announcement, Hyperliquid explained that validators cannot individually manage every possible tradeable event as the number of potential outcomes grows. Its proposed system would instead ask validators to approve standardized templates defining how each category of market must operate.
Once validators approve a template, Hyperliquid will store and enforce its rules onchain. Any deployer could then launch a market using that format without seeking a separate validator vote for each listing, according to the platform.
Deployers would remain responsible for defining and settling individual markets under the approved template’s conditions. Hyperliquid said validators would still create “canonical markets,” although it expects them to approve fewer than 10 such outcomes or questions each year.
Hyperliquid’s proposal concerns the technical deployment of outcome markets and does not resolve the US legal dispute over sports contracts. The House hearing instead centers on whether existing CFTC powers provide adequate safeguards or whether Congress should prevent platforms such as Kalshi and Polymarket from offering sports-linked products altogether.
