Washington is currently witnessing a massive influx of corporate cash, but it isn't coming from traditional defense contractors or big pharma. Instead, companies running prediction markets like Kalshi and Polymarket are flooding K Street with lobbying dollars.
They aren't doing it just to build goodwill. They're doing it because they're facing an existential fight.
Monthly trading volume on platforms like Kalshi and Polymarket skyrocketed from under $1 billion in mid-2024 to nearly $24 billion by early 2026. When that much money starts moving, people take notice. Right now, prediction markets are caught in a brutal crossfire between state regulators, traditional sportsbooks, and federal lawmakers. To survive, these platforms are pouring record amounts into lobbying to ensure federal law keeps their doors open.
The Sudden Cash Surge on Capitol Hill
Federal disclosures reveal a dramatic shift in how event-contract exchanges operate. Kalshi spent $500,000 on federal lobbying in just the second quarter of 2026—its largest quarterly spend since registering to lobby. They also hired heavy-hitting lobbying firms like FTP (formerly Forbes Tate Partners) to push back against a wave of hostile legislation.
Polymarket's parent company, Blockratize, has similarly hired former regulators—including ex-Commodity Futures Trading Commission (CFTC) advisers—to walk the halls of Congress.
Why the sudden panic? Because politicians on both sides of the aisle are pushing bills to shut them down.
Take the STOP Corrupt Bets Act introduced by Representative Jamie Raskin and Senator Jeff Merkley. It aims to outright ban prediction market contracts tied to elections, government actions, sports, and military operations. Meanwhile, bills like the PREDICT Act and the Stop Lawmakers From Predicting Act seek to ban politicians and government employees from trading on these platforms altogether.
For platforms that built their user bases on political and sports event contracts, these bills are a direct threat to their core business model.
Traditional Gambling Giants Are Fighting Back
Prediction market exchanges aren't just fighting moralizing politicians. They're fighting established corporate giants with even deeper pockets.
Commercial gaming operators like DraftKings, FanDuel, and Fanatics view prediction markets as unauthorized backdoors into sports betting and event gambling. Traditional sportsbooks have to comply with state-by-state licensing, pay heavy state taxes, and enforce strict age limits. Prediction markets, by claiming status as CFTC-regulated financial derivative exchanges, have largely bypassed state gambling authorities.
That gap has infuriated both sportsbooks and state governments. The American Gaming Association estimates states are losing out on over $1.2 billion in tax revenue because users are trading event contracts instead of placing traditional sports wagers.
To hit back, sports betting operators have funneled over $70 million into political action committees like Win for America to lobby against prediction markets. Native American gaming associations and state gaming boards have also joined the fight, arguing that prediction markets strip local communities of revenue while stripping consumers of state-level protections.
The CFTC Jurisdictional Battlefield
The core legal argument comes down to a single question: Are event contracts financial derivatives or glorified gambling?
Prediction market executives argue their platforms aren't casinos—they're hedging mechanisms and forecasting engines. They claim traders use event contracts to offset real-world risks, like shifting interest rates, commodity prices, or geopolitical chaos.
Because of this framing, prediction markets fall under the purview of the CFTC rather than state gambling boards. Under Chairman Mike Selig, the CFTC has aggressively defended its exclusive right to oversee these exchanges. The federal agency has actually sued nine states—including New York, Illinois, Arizona, and Kentucky—to block state-level bans on event trading.
┌─────────────────────────────────────────────────────────┐
│ THE REGULATORY TUG-OF-WAR │
├────────────────────────────┬────────────────────────────┤
│ Prediction Markets & │ State Regulators & │
│ CFTC Supporters │ Traditional Gambling │
├────────────────────────────┼────────────────────────────┤
│ • Federal oversight │ • State licensing & taxes │
│ • Classified as "swaps" │ • Classified as "gambling" │
│ • 50-state national access │ • Age 21+ state limits │
│ • Hedging & forecasting │ • Consumer protection rules│
└────────────────────────────┴────────────────────────────┘
If the CFTC retains sole jurisdiction, prediction markets keep operating nationally under a single federal framework. If state regulators or Congress win, these platforms will be forced to shut down or obtain individual licenses in all 50 states—a nightmare scenario that would destroy their liquidity.
Insider Trading Scandals Fuel the Fire
Lobbyists aren't just fighting tax disputes. They're doing damage control over headline-grabbing insider trading controversies.
When millions of dollars sit on the outcome of a single government vote or military decision, the incentive to trade on private information is massive. Recent cases have drawn intense scrutiny:
- Military leaks: The Department of Justice charged a U.S. Army soldier with using classified intelligence to bet $400,000 on Polymarket regarding military actions in South America.
- Congressional trades: Multiple politicians, campaign aides, and federal staff have faced accusations of placing wagers on political races or legislative votes right before public announcements.
- Executive actions: Suspicious trading surges have been detected minutes before major White House executive orders and rate announcements were made public.
These scandals give opponents all the ammunition they need. Critics argue that unlike stock markets, which have decades of strict insider trading laws, prediction markets operate in a regulatory gray area where bad actors can profit directly off classified or non-public information.
Where Event Markets Go From Here
The outcome of this lobbying war won't just dictate how Kalshi and Polymarket operate—it will redefine what counts as a financial market in the United States.
If you trade on prediction platforms or follow market regulation, keep a close eye on these three developments:
- Watch the CFTC litigation tracker: Pay attention to federal court decisions in cases where the CFTC is suing state governments like Kentucky and New York. If an appellate court rules that states have the right to enforce local gambling laws against event contracts, prediction market volume will crater overnight.
- Monitor the federal age-verification push: To appease regulators, platforms like Kalshi are already backing bipartisan federal bills that require facial recognition and strict age verification for users. Expect platforms to accept harsher compliance requirements to avoid outright bans.
- Track congressional committee votes: Watch how the House Agriculture Committee and Senate Banking Committee handle pending bills like the STOP Corrupt Bets Act. If committee leadership lets these bills reach the floor, expect lobbying spending to double again before the midterms.
