On July 21, the Digital Assets Subcommittee of the House Agriculture Committee held a hearing on sports betting through prediction markets. Lawmakers expressed doubts about whether the current regulations and resources of the CFTC are sufficient to oversee this rapidly growing sector.

Republican Dusty Johnson noted that derivatives have changed significantly over the past decades, while laws were written without considering new products. He stated that it is time for Congress to get involved.

“Courts are already involved, and the Commission is working. But I see no reason why the Committee and Congress should stay on the sidelines. I’m sure we have a role to play here as well,” Johnson said.

Committee Chair Glenn Thompson suggested that a separate law could be enacted if the CFTC's powers prove inadequate. However, he emphasized the need to first determine if such gaps exist.

Resources vs. Authority

Another topic of discussion was the regulator's resources. For the fiscal year 2027, the CFTC requested a budget of $410 million from Congress, which is a 12.3% increase from the previous year. In comparison, the SEC's request is $1.9 billion, and its staff exceeds 4,000 compared to approximately 550 at the CFTC.

Congressman Austin Scott pointed out that the agency is tasked with overseeing complex products with limited capabilities.

“If we continue to expand the agency's responsibilities without increasing its capacity, something will inevitably be overlooked,” he said.

According to attorney and Katten Muchin Rosenman partner Karl Kennedy, the CFTC is currently indeed "understaffed" to regulate platforms like Kalshi and Polymarket. He believes the CLARITY Act could expand the regulator's authority—both over digital assets and prediction markets. Thus, increasing the agency's funding is crucial, the expert argues.

States vs. CFTC

The hearing took place amid a conflict between federal and state authorities. CFTC Chair Michael Selig insists that the agency has "exclusive jurisdiction" over prediction markets, as event contracts fall under the category of swaps. States disagree, claiming that the platforms violate local gambling laws. Some have filed lawsuits against Kalshi and Polymarket over sports betting.

The sector is rapidly growing, with Kalshi valued at approximately $22 billion and Polymarket at $15 billion. By the end of June, trading volumes on the largest platforms in this segment exceeded a record $50 billion.

Source: The Block.

Senate Republicans are hoping to vote on the CLARITY Act before the August recess and promise to publish the text of the bill soon. However, how exactly the legislation will affect prediction markets remains unclear.

It is worth noting that in June, American gambling associations urged the U.S. Senate to ban prediction markets related to sports and gambling.