Prediction markets face hearing call from 11 Senate Democrats

All 11 Democrats on the Senate Banking Committee have asked Chair Tim Scott to hold a public hearing on prediction markets after Republican members met privately with Kalshi’s chief executive.

In a Sep. 23 letter, the Democratic members of the Senate Banking, Housing, and Urban Affairs Committee asked Scott to convene a hearing open to the full panel. Ranking member Elizabeth Warren and Sen. Catherine Cortez Masto led the request after reports that Republicans planned a private discussion with prediction market executives, including Kalshi representatives.

The senators said a public session would let lawmakers question industry participants about consumer exposure, market integrity and the financial products being offered. Their request focused in part on contracts linked to company performance, which they said could qualify as security-based swaps and come under Securities and Exchange Commission rules.

According to The Block, Republican committee members met Kalshi CEO Tarek Mansour on Sep. 23. Scott told the outlet that the discussion covered securities-linked products, how investors use them, retail protections, and regulatory questions for Congress.

Why Democrats want a public prediction markets hearing

The letter argues that both individual and institutional investors are gaining exposure to security-based prediction markets. As firms seek SEC approval for products tied to corporate earnings, the senators said the Banking Committee should examine how such contracts are offered and supervised.

“The full Senate Banking Committee has a critical oversight role to play,” the lawmakers wrote, referring to requests for approval of options linked to company earnings. Their letter asks Scott to allow every committee member to take part in a public hearing, rather than limit the discussion to a meeting with Republican members and industry executives.

The SEC question matters because prediction markets do not all involve the same underlying event. A contract on a sports result raises different regulatory issues from one tied to a public company’s earnings. The Democrats said the latter type could meet the legal definition of a security-based swap; the letter presents that as a possibility for examination, not a finding that every such contract falls under SEC authority.

Kalshi has separately pursued products linked to U.S. shares. As reported in September, it filed rules for stock and ETF perpetual futures with the SEC and CFTC, proposing 23-hour weekday trading and a minimum customer margin of 15.50%. Those proposed security futures differ from the event contracts discussed in the senators’ letter, but the filings show why both agencies feature in questions about Kalshi’s products. The CFTC had not approved the stock perpetual submissions when that report was published.

Trading volume has risen as lawmakers examine investor losses

For the scale of the industry, the senators pointed to the rapid growth of Kalshi and Polymarket. Pew Research Center found that their combined monthly global trading volume rose from less than $5 billion in September 2025 to about $24 billion in April 2026. Pew’s newer analysis put the total at $53 billion in July, up from $26 billion in May, with sports accounting for much of the increase.

Pew’s measure counts contracts at their $1 value if the outcome is correct, rather than the price a trader paid. It is a measure of trading activity, not an estimate of the cash traders put into their accounts. Its September report also found that combined volume remained around $47 billion in August after easing from July’s level.

The Democrats raised the risk of manipulation and trading by people with advance knowledge of an outcome. They also cited research suggesting that profits are concentrated among a small share of users while many others lose money. Those concerns formed part of their case for questioning platforms in public.

Pew’s study of 11,989 active Polymarket wallets provides a more specific view of trading results. Over a six-week period from May to June, 56% of the sampled accounts lost money, while 7% made more than $1,000 and 9% lost more than $1,000. Pew said the typical account was close to breaking even. Its sample did not cover Kalshi or Polymarket’s newer U.S. platform, so the findings do not describe the results of all prediction market users.

CFTC warnings and state cases add to the oversight debate

Market integrity is also receiving attention from the Commodity Futures Trading Commission. In coverage of its warning, crypto.news reported that CFTC staff had flagged contracts based on what a named person says, attends, or does as especially vulnerable to manipulation. The agency called for exchanges to explain how they would identify people who could influence an outcome and detect misuse of nonpublic information.

The CFTC has already brought cases involving traders whose access or conduct affected event-contract outcomes. In one case described in the agency’s orders, a former White House teleprompter operator used advance access to presidential speeches to trade contracts tied to President Donald Trump’s remarks. In another, former Rep. George Santos traded a contract concerning his attendance at the 2026 State of the Union while making public statements about his plans.

Sports contracts pose a separate question for U.S. customers: whether federal oversight of a registered derivatives exchange prevents states from applying their gambling laws. New Jersey asked the Supreme Court in September to review a ruling favoring Kalshi. As the state’s petition was previously covered, New Jersey argues that federal derivatives law does not strip states of authority over sports wagering within their borders. Kalshi maintains that its CFTC registration places the contracts under federal oversight.

At the same time, Kalshi has sought to expand access for professional traders through a proposed margin framework for selected event contracts. Its Sep. 22 filing would allow eligible participants to post margin rather than fund the full possible loss of a position at the outset. Sports contracts are excluded from the proposal, and access would be limited to participants trading through a registered futures commission merchant or approved to clear their own trades.