Democratic Midterm Win Could Bring Tougher Scrutiny for Prediction Markets and the CFTC

Prediction markets have puzzled Washington, where lawmakers are still learning how the exchanges function and Congress has done little to either support or restrain them. The coming midterm elections could change that, as both the platforms and their regulator may face closer examination under a broader Democratic oversight agenda.

For now, the issue has not split cleanly along party lines, with supporters and critics found on both sides. Since 2025, nearly 30 bills related to prediction markets have been introduced in the House and Senate, most of them sponsored by Democrats in the House. The measures would mainly bar or limit members of Congress and their staff from using the platforms, or prohibit certain contracts, especially sports-related ones. None has passed.

Polls indicate Democrats are on track to win the House next month, which could improve the odds for those proposals under Democratic leader Hakeem Jeffries. Committee investigative powers could also be used to question the role of Donald Trump Jr., the president's son, as an adviser to Kalshi and Polymarket. Many Democrats and some Republicans fear those ties may have helped the companies win favorable rulings from the administration.

Trump Jr.'s venture capital firm, 1789 Capital, has also invested in Polymarket. A spokesperson said he does not sit on the firm's investment decision-making committee and cannot allocate capital, and that his Polymarket advisory role is separate from the firm's investment. Another spokesperson called the concerns politically motivated and said Trump Jr. never deals with the federal government on behalf of companies he advises or invests in. Kalshi CEO Tarek Mansour said the connection creates an "optics issue" but that it has never been used to gain favor. Sen. John Curtis, R-Utah, has separately called for a probe of Trump Jr.'s interests.

Both companies also have Democratic ties. Stephanie Cutter, a former Obama staffer, is a senior policy adviser at Kalshi, and Polymarket hired Rob Eskridge, a former chief of staff to a Democratic congressman, in September to lead government relations. Both platforms say they welcome lawmakers' engagement. "We welcome scrutiny," a Polymarket spokesperson said. Kalshi said it supports frameworks on insider trading, consumer protection and clear rules on permitted contracts.

Sean Patrick Maloney, a former Democratic congressman who leads the Coalition for Prediction Markets, cautioned his party against going too far. Pushing the industry offshore, he said at a New York conference this month, would move activity to platforms with weaker protections against manipulation.

The Commodity Futures Trading Commission could face pressure as well. Some lawmakers doubt it can oversee the fast-growing sector after staffing cuts in 2025. In July, the Government Accountability Office accepted a request from Sen. Elizabeth Warren, D-Mass., to review the agency's workforce reduction. Warren would likely chair the Senate Banking Committee if Democrats win that chamber, and is expected to expand oversight of the agency.

CFTC spokesperson Zach Fulton rejected the criticism, saying the agency regulates nearly $600 trillion in notional value and can oversee prediction markets of less than $1 trillion. He said the commission is on track to hire about 100 employees in critical areas by the end of 2026. The agency has recently sought public comment on vertical integration within its exchanges and warned exchanges about manipulation risks in "mention markets."

Still, the CFTC continues to defend the platforms against states that argue their sports offerings amount to gambling, and it keeps approving new products. David Aron, a former CFTC employee, said committees in a Democratic-led chamber would be "a little sharper," adding: "That will not be fun." CNBC, the original publisher, disclosed a commercial relationship with Kalshi.