Kalshi has found itself at the center of a growing battle over sports betting regulation as its trading activity continues to expand rapidly.
According to reports, a coalition of gaming groups, tribal organizations, and labor unions is urging the U.S. Senate to prevent prediction market platforms from offering sports and casino-style event contracts through upcoming legislation.
The coalition includes the American Gaming Association and the Indian Gaming Association, which argue that sports betting should remain under the control of state and tribal regulators rather than federal agencies.
In a letter sent to lawmakers, the groups claimed that prediction markets have created what they describe as the largest expansion of gambling in the United States in recent years without direct approval from Congress.
At the center of the dispute is the question of who should regulate these markets. The Commodity Futures Trading Commission (CFTC) has taken the position that prediction markets fall under federal commodities laws. Gaming groups strongly disagree, arguing that sports betting is fundamentally different from commodities trading and should remain under existing state and tribal oversight.
The debate has also raised financial concerns. According to estimates cited by the American Gaming Association, states may have lost around $1.08 billion in potential tax revenue since sports-related prediction markets began gaining popularity.
Despite the controversy, Kalshi has continued to expand its business. The company recently revealed that its new perpetual futures products generated more than $5.5 billion in trading volume within just two weeks of launching.
Kalshi currently offers several cryptocurrency-related perpetual futures contracts, including products linked to Bitcoin, XRP, and Solana. The company is also exploring additional products and continues discussions with regulators.
Perpetual futures allow traders to maintain positions without expiration dates, making them popular among active traders. However, they can also increase risk because leverage may magnify losses during periods of market volatility.
At the same time, lawmakers are still debating the final version of the CLARITY Act, a major piece of legislation aimed at defining regulatory responsibilities for digital assets in the United States.
While the bill focuses primarily on cryptocurrency regulation, gaming groups want lawmakers to include language that clearly prevents sports betting and casino-style contracts from being offered through federally regulated prediction markets.
Legal experts believe the disagreement could eventually reach the U.S. Supreme Court, as federal regulators, prediction market operators, states, and tribal authorities continue to clash over who has the authority to oversee these rapidly growing markets.
For now, the fight highlights the growing tension between traditional gambling regulations and emerging financial products that blur the line between betting and trading.
