'now Is The Time': Victorious Democrats Vow To Rein In Prediction Markets

It was the tale of two election nights for prediction markets.

Kalshi and Polymarket, the two dominant platforms, foretold Democrats’ sweeping victories in the midterms — and well before much of the pundit class — affirming to supporters their value as forecasting tools. But the Democratic wave could also mark the beginning of an uncomfortable new era of scrutiny for the companies in Washington.

President Donald Trump’s regulators have embraced the prediction markets over the last two years, clearing the way for them to quickly expand their businesses with a frenzy of new wagers on politics, sports and stocks. Now, Democrats are gearing up for an aggressive oversight regime that is expected to put the upstart industry under intense pressure from Capitol Hill.

“Folks are rightfully concerned about dangerous bets on elections, war, assassinations, terrorism, and government actions that go against the public interest,” Sen. Jeff Merkley, an Oregon Democrat and longtime critic of the markets, told POLITICO in a statement. "We need to rein in this gambling, and with Democrats taking back control of Congress, now is the time for long-overdue legislative action.”

Rep. Maxine Waters (D-Calif.), who is launching a bid to chair the House Financial Services Committee, pledged Friday to curb "predatory lending and predatory platforms, including prediction markets, so that our constituents keep more of their hard-earned dollars in their pockets."

And just days before the election, Democratic Sen. Elizabeth Warren of Massachusetts — the potential next Senate Banking Committee chair — questioned the “legitimacy and regulation” of the platforms’ election-focused markets in a letter to Kalshi CEO Tarek Mansour and Polymarket CEO Shayne Coplan. Warren penned the letter along with Sen. John Curtis of Utah, a Republican. The Supreme Court, meanwhile, is weighing whether to take up a case related to the markets and who should get to oversee them.

“These guys don’t have an ally in Congress,” said a former Wall Street regulator, who was granted anonymity to speak candidly. "To a certain extent, they might even be the new crypto as far as congressional attention from Democrats."

The former regulator said the push could get “pretty intense” for the companies — noting that Democrats and Republicans alike have sounded the alarm about the markets.

The increased oversight would mark yet another U-turn for the prediction markets, whose regulatory fate has flipped 180 degrees since Trump's election two years ago. It could also offer clues into how Democrats are taking aim at companies with ties to the president or his family. (Donald Trump Jr., his eldest son, is an adviser to both Kalshi and Polymarket. His investment firm has also invested in Polymarket.)

The crypto markets, which have become a key piece of the Trump business empire, are expected to also face similar probing from Democrats.

The rise of the prediction markets has stirred questions and concerns from lawmakers about the platforms, including how susceptible they are to insider trading, whether they are flouting state gambling laws and whether the U.S. should allow betting on real-world events, as the prediction markets do.

For their part, the markets see themselves as a new class of financial exchanges. In addition to their roles as forecasting tools, proponents say the markets offer a critical tool for investors, companies and individuals looking to offset financial risk from events like the elections. What's more, the markets say they are highly regulated trading platforms that follow the same rules as Wall Street stalwarts like the New York Stock Exchange's parent company and CME Group.

In response to Warren and Curtis' letter, Kalshi's head of federal government relations, John Bivona, touted the company's election-focused protections and enforcement. Bivona wrote in a Nov. 2 letter that Kalshi had more than a dozen active inquiries tied to election trading.

"Like all regulated markets, policing for insider trading and market manipulation are critically important objectives at Kalshi," wrote Bivona, a longtime Democratic strategist who served in the Biden administration. "This is both because we are required to implement procedures to detect and punish illicit trading activity and because participation in our markets will only grow if customers are confident these markets are fair."

Kalshi and Polymarket, valued in the tens of billions of dollars, have been some of the buzziest startups on all of Wall Street — courting the interest of major financial firms, Silicon Valley giants and even media outlets like CNN.

The midterms represented what Mansour has called the "first prediction-market election." And the platforms broadly delivered on their forecasts that Democrats would take both the House and Senate. There were exceptions — namely, Democrats' surprise wins in South Carolina and in the Texas gubernatorial race. But both Kalshi and Polymarket have been quick to trumpet their successes in the days since.

Still, executives and lobbyists have been bracing for additional scrutiny. Case in point: Kalshi has been building out its presence on K Street in recent months with a series of high-profile Democratic hires.

A Polymarket spokesperson said the company's platform "is an institutional-grade exchange with strong market-integrity and customer-protection programs." The company, the spokesperson added, welcomes the chance "to work with lawmakers on both sides of the aisle to help regulate and realize the full potential of prediction markets."

In an interview before the election, Mansour, when asked about becoming an oversight target, said it's ultimately a matter of "education." Policymakers, he said, need to be aware that Kalshi is a transparent and regulated market whose odds are driven by its users — and not the company. On Thursday, he said on CNBC that Kalshi has long engaged with lawmakers from both parties and will continue to do so.

And while he doesn’t know yet if he’ll be called to testify, Mansour said he’d “abide by whatever needs to happen."