Econometer: Is federal legislation needed to regulate prediction markets?

Online prediction markets, like Kalshi and Polymarket, have captured the nation's attention with high-profile claims of wrongdoing.

The markets allow users to vote on everything from sports to news events. The Department of Justice recently arrested a U.S. soldier who allegedly won roughly $400,000 from bets using classified intelligence.

Prediction markets are not a new concept, with trading on futures of agricultural products kicking off in 1898 at the Chicago Mercantile Exchange. Several state attorneys general have sued the platforms, alleging they are gambling operations. Prediction markets, like Kalshi, argue they are a financial exchange - not a sportsbook.

U.S. Sen. Richard Blumenthal, D-Conn., recently introduced nationwide legislation that he said would ban wagers on war, crack down on insider trading and protect consumers from fraud.

Question:Is federal legislation needed to regulate prediction markets?

Economists

Alan Gin, University of San Diego

YES: There are too many ways the "prediction" markets can be abused. One is the use of inside information. There have been a number of suspiciously timed transactions ahead of geopolitical events and military strikes, such as the ouster of Nicolas Maduro in Venezuela and the U.S. conflict with Iran. Similar are situations where individuals can influence the results through their actions, such as athletes in sporting events. Finally, there are ethical issues with profiting on things such as deaths, natural disasters and wars.

James Hamilton, University of California-San Diego

NO: Prediction markets are often more accurate than conventional polls and traditional news outlets. I do not see any way to prevent government regulation of these markets from evolving into censorship of ideas and suppression of facts that the country's rulers would like to hide from the public. I have no problem with prohibiting government employees from betting in these markets. I have a big problem with the government telling me what I should believe.

Kelly Cunningham, San Diego Institute for Economic Research

NO: Arbitrary one-size-fits-all regulations imposed by politicized bureaucracy are inferior to freely adopted bylaw provisions imposing selective restraints, the wider argument favoring contract law over government law. Compelling evidence shows decentralized systems of market-like bidding generate more accurate predictions than traditional forecasting techniques of surveys or focus groups. Insider betting seems nigh impossible to regulate. The free market allows discovery of best ways to inhibit and punish undesirable behavior - ways politicians and bureaucrats could never discover.

Norm Miller, University of San Diego

YES: While prediction markets might provide useful information for economic pundits, they are essentially gambling sites and potentially are another way to bet on or hedge financial assets like security derivatives. As such, they should require verification of minimum age, restrict insider trading and ban predictions related to war, death and military actions as Blumenthal's SAFE Act proposes.

David Ely, San Diego State University

YES: Federal regulation could clarify the powers of the Commodity Futures Trading Commission, or CFTC, to regulate the contracts that trade on prediction markets. Most usefully, legislation could define prediction markets as closer to gambling rather than the markets the CFTC typically oversees and thus give states the clear authority to apply their controls on gambling now in place. Rules to safeguard against insider trading and to impose restrictions on age would be welcome as well.

Ray Major, economist

YES: The temptation to make money using inside information is too great to leave the prediction market unregulated. These markets have simply become another form of online gambling. Regulations are needed to ensure that the markets operate with integrity and transparency, and prevent market manipulation and insider trading by government officials. Guardrails also need to be in place to prevent profiting from contracts tied to political violence, assassinations or secret military operations.

Executives

Jamie Moraga, Franklin Revere

YES: Without regulation, prediction markets could be misused and manipulated, leading to insider trading, market manipulation and consumer fraud. Prediction markets involve financial risk, similar to online gambling. They allow individuals to participate in contracts tied to future events, including sports, political and economic outcomes, that can be influenced or manipulated. The rapid expansion of prediction markets is outpacing existing oversight and does require stronger regulation to protect consumers.

Mark Kersey, San Diego County Taxpayers Association

NO: With a big caveat: The U.S. House must follow the Senate's lead and ban its members and staff from betting via prediction platforms. The White House must also issue an executive order mandating the same ban for all government employees and their immediate family members. If those bans don't happen, then legislation is necessary. To avoid further eroding the public's trust, policymakers and government employees cannot be allowed to trade on insider information or policies they help craft.

Phil Blair, Manpower

YES: This new potential addiction needs to be monitored to protect the young and the innocent, much like any form of gambling. It is far too easy to be abused by those who do not understand the possible ramifications.

Gary London, London Moeder Advisors

YES: Clearly, some restraining legislation is in order. My more global observation is that I feel that this sort of activity cheapens our society. I'm not against recreational fun gambling, but it seems like it is saturating our communities. It felt better when the betting stayed in Vegas, at the racetracks, or on Wall Street, and didn't spill over to tribes, sports books and now prediction platforms.

Bob Rauch, R.A. Rauch & Associates

YES: Federal legislation is needed to close gaps in consumer protection and market integrity, requiring identity verification, prohibiting markets tied to conflict or crime, and limiting platforms to approved jurisdictions. But enforcement is the harder problem. Prediction markets create a manipulation incentive unlike any in traditional finance: a participant who bets $10 million on a corporate acquisition can simply pay to make it happen. Existing surveillance tools weren't built to detect that. Regulation is necessary, but its limits should be acknowledged.

Austin Neudecker, Weave Growth

YES: Today's prediction markets are prone to abuse. The recent case of a U.S. military member using classified intelligence and growing concerns around athletes influencing game outcomes underscore how difficult insider trading is to detect or prevent. Many contracts involve outcomes that can be influenced or known early by participants. Regulation should narrow allowable markets and treat them closer to gambling, with strict limits and disclosures. The goal is to reduce obvious avenues for manipulation.

Chris Van Gorder, Scripps Health

YES: The federal government should act. Prediction markets take online gaming to a level akin to insider trading. I also think online gambling should be illegal nationwide. As Warren Buffett recently said, these online gambling and predication markets are one of the biggest regressive tax schemes in the country. We need not only more regulation, but more efforts to help those with a gambling addiction.

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This story was originally published May 8, 2026 at 6:36 PM.