Steil bill bans lawmakers from prediction market bets, citing $1.08B loss

Republican Representative Bryan Steil proposed a clause June 18 banning members of Congress and their families from betting on prediction markets covering policy, politics and elections.

The clause will be attached to an existing bill that prohibits lawmakers from purchasing new individual stocks, a measure supported by House Speaker Mike Johnson and President Donald Trump, a spokesperson for Steil's office said.

The proposal targets event contracts on platforms including Kalshi and Polymarket, which have drawn scrutiny from both federal and state regulators. The Commodity Futures Trading Commission under Chair Michael Selig has claimed exclusive jurisdiction over prediction markets, arguing the contracts qualify as swaps under agency oversight.

The American Gaming Association estimates state gaming authorities have lost about $1.08 billion in tax revenue since prediction markets began offering sports event contracts, intensifying the jurisdictional battle. The dispute between federal and state regulators could ultimately reach the US Supreme Court, legal experts said.

The CLARITY Act, which would transfer some digital asset oversight from the Securities and Exchange Commission to the CFTC, passed the House in July 2025 and is expected to clear Congress by August. Steil's prediction market clause would be added to that broader legislative package.

The pushback from gaming authorities comes as the CFTC has taken state-level regulators to court over crackdowns on prediction market platforms. Kalshi and Polymarket have argued that their event contracts are swaps subject only to CFTC jurisdiction, not state gambling laws.

"The CFTC was created to oversee commodities and derivatives markets, not gambling and not sports wagering," a coalition of state gaming regulators wrote in a letter opposing the agency's assertion of authority. The groups said the CFTC lacks both the expertise and infrastructure to police nationwide sports betting.

The US Supreme Court's 2018 decision in Murphy v. National Collegiate Athletic Association gave individual states authority to regulate sports gambling. However, prediction market operators contend that event-based contracts fall outside that framework, setting up a potential high court showdown over where the line between swaps and gambling lies.

For prediction market platforms, the Steil bill introduces regulatory uncertainty at a time of rapid growth. Kalshi recently added a software partner to boost surveillance capabilities as it seeks to legitimize its operations. The outcome of the federal-state jurisdictional dispute will determine whether prediction markets operate under a unified national framework or face a patchwork of state-level restrictions.

The bill's bipartisan backing, including support from Trump and Johnson, shows momentum for broader crypto-focused regulatory clarity. However, the specific ban on lawmaker participation could reduce trading volume from politically connected participants, potentially impacting liquidity on platforms offering political event contracts.

The CLARITY Act's expected passage by August will be a key test for how Congress approaches digital asset regulation. If Steil's clause is included, it would mark the first federal restriction specifically targeting prediction market participation by elected officials, setting a precedent for how lawmakers interact with these emerging financial platforms.

This article is for informational purposes only and does not constitute investment advice.