Curtis Raises Concerns About Prediction Markets, Gambling

Senator warns federal prediction markets could undermine state gambling laws and consumer protections at Senate hearing
WASHINGTON —During a U.S. Senate Commerce, Science, and Transportation Committee hearing on sports betting in prediction markets and federally regulated event contracts, Senator John Curtis (R-UT) raised concerns about the rise of prediction market contracts and their clear resemblance to gambling. Speaking with former Congressman Patrick McHenry, Senator Curtis questioned how prediction markets differ from traditional gambling in the eyes of everyday Americans. Senator Curtis underscored that many Utahns view these products as indistinguishable from sports betting and expressed concern that federally regulated exchanges could undermine states that have chosen to prohibit gambling altogether.
Senator Curtis also highlighted the Prediction Markets Are Gambling Act , bipartisan legislation he introduced that is aimed at preventing federally regulated exchanges from offering sports betting and casino-style contracts under the jurisdiction of the Commodity Futures Trading Commission (CFTC). Read more about the legislation here .
The full transcript of the exchange is below, and video can be found here .
Senator Curtis: Mr. McHenry, I’m conflicted whether I call you Chairman, Congressman, Speaker. But I will tell you, it is a delight to see you again and I really enjoyed serving with you. If I’m honest, even a couple of months ago, I would not have been able to tell you what a prediction market was. Just in one sentence, to the man and woman back in Utah, what is a prediction market?
The Honorable Patrick McHenry: It is an open exchange. It is under commodities regulation, called a “swap.” You have folks that have a contract. Some say “yes,” some say “no,” and they determine it. The marketplace, the consumers, and the participants determine what is the ratio on the contract, the likelihood of something happening.
Curtis: What’s exactly happening when an event contract is purchased?
McHenry: The easiest thing for me to explain is in the political setting. The political setting, ‘is John, Jane, or Joe going to win the election?’ And after the election, the contract is certified based off of information on whether or not that happened and then people are paid out based off the ratio of that final contract.
Curtis: Okay. If I were hearing that back in Utah, I would say, “I think something might happen. I’m going to put money down on it, and I have the chance of either making more money or losing money on that.” Is that accurate?
McHenry: Yes. And it’s an uncertain outcome, just like whether or not you’re going to have a crop that comes in this fall or not, based off of weather, unpredictable events along the way.
Curtis: So, if I’m talking to these folks back home in the town hall meeting, they’re going to say to me, “Tell me how that is not gambling,” right? It seems to meet every definition of gambling.
McHenry: Well, I understand how that is viewed. When grain futures came to fruition over 100 years ago, it was viewed much the same. This is an uncertain outcome on whether or not your crop will come in in the fall, and you can hedge against it in the marketplace about an uncertain event that is driven largely by acts of God, Mother Nature, and crop yields.
Curtis: So, can I interrupt you, only because of time? I know what you’re saying is important, but as you know, we have very limited time. My father was an insurance agent and taught me that you buy insurance for things you can’t afford to pay for. And it feels like we’ve moved from the farmer who’s buying crop insurance because he can’t afford it—he’ll be wiped out, right?—versus betting for an income or perhaps loss on that. And I guess my fundamental question is, like, how is that any different than a sports wager or betting?
McHenry: Well, it’s based off the business model. The business models are fundamentally different from a sportsbook. The sportsbook, the house sets the line, and when the consumer loses, they profit. And for an exchange like this, the exchange is based off of two individuals that benefit, and they pay a fee, just a flat fee, for that engagement. The business models are very different.
Curtis: Dr. Levant, you have not had much chance to weigh in. I’d love you to weigh in on the Speaker’s thoughts.
Dr. Harry Levant: It’s difficult to know where to start, but let me take the most recent comment. Poker and horse racing have the exact same business model. No one would dispute they’re gambling. Sports futures contracts are gambling. The business model is just to take the money off the top. The house has to win every time, and the public loses. That’s contracts.
The other part I want to address is the avalanche of unregulated advertising on social media. I’ve, over the last year, spoken in six prep schools in four different states. This is not exactly a scientific survey, but I ask the students in each of these schools at the start, “How many of you know what Kalshi is?” Ninety-five percent of the hands go up. I ask, “What is a same-game parlay?” Ninety-five percent of the hands go up in the room, and it’s all from social media.
Curtis: So, Congressman McHenry, let’s just put that aside for a minute. Just overall, why do we regulate gambling?
McHenry: Because society has determined that this is not in—well, elected officials have determined it’s not in society’s interest, and therefore put weights and measures around it and protections.
Curtis: Great. And Dr. Levant, we know you’re going to agree, so I’m not—
Levant: It’s a known addictive product, just like heroin. That’s why we regulate it.
Curtis: This is where I really want to point out the state of Utah and the state of Hawaii. We’ve made a conscious decision because of these impacts to not allow gambling of any kind in our state. And it won’t surprise you to know, from that perspective, I see this very differently than a lot of my other colleagues. So, you can see why I take a close interest whenever platforms begin offering something that feels like gambling, that talks like gambling, that smells like gambling. And several months ago, Senator Schiff and I introduced a bill. It’s called the Prediction Markets Are Gambling Act , to stop the CFTC-regulated exchange from offering sports betting and casino-style contracts. And quite frankly, for me, it’s about preserving the states’ rights and protecting our state’s ability to do that.