TLDR
- Republican senators grilled prediction market advocate Patrick McHenry at a Senate subcommittee hearing on sports integrity
- Sen. Ted Cruz compared prediction markets to sports betting, questioning their regulatory justification
- The American Gaming Association piled on, calling out prediction markets for infringing on the gambling industry
- Senators and witnesses agreed that prop bets and micro bets pose the biggest threat to sports integrity
- Bipartisan pressure is mounting on Capitol Hill against prediction markets despite the Trump administration’s pro-market stance
The Senate Consumer Protection Subcommittee held a hearing Wednesday that was supposed to focus on sports integrity but quickly turned into a pointed examination of prediction markets.
Patrick McHenry, a former congressman now serving as Senior Advisor to The Coalition for Prediction Markets, faced tough questioning from members of both parties. The hearing was titled “No Sure Bets: Protecting Sports Integrity in America.”
Subcommittee Chair Marsha Blackburn opened the session by raising concerns about gambling addiction, harassment of college athletes, and prediction markets operating outside state regulation. She set the tone for what became a two-hour grilling.
Republicans Break From Pro-Market Stance
The hearing marked a shift from the friendlier treatment prediction markets received at a House Agriculture Committee hearing last month. At that earlier session, Republicans were notably warmer toward CFTC head Mike Selig.
Sen. Ted Cruz said prediction markets have started offering event contracts on sporting events that are “for all intents and purposes sports bets.” He pressed McHenry on whether the CFTC’s justification for allowing these contracts holds up.
Cruz asked what the economic consequence of a pitcher throwing a ball or a strike could possibly be. McHenry responded that it is up to consumers to decide what qualifies as a swap under Dodd-Frank’s broad definitions.
Sen. John Curtis pushed McHenry on the basic structure of prediction markets. He concluded that in any swap, someone wins and someone loses, which sounds a lot like gambling.
McHenry argued that prediction markets are fundamentally different from sportsbooks. He said sportsbooks set lines and profit when customers lose, while exchanges earn fees from trades between participants.
Curtis was not satisfied. He interrupted to ask how using prediction markets as a substitute for insurance was different from betting at a casino.
American Gaming Association President Bill Miller also testified and took direct aim at prediction markets. He called them out for infringing on the regulated gambling industry.
Integrity Concerns and Micro Betting Risks
The hearing did address its stated topic of sports integrity. Senators and witnesses found common ground on the dangers of prop bets and micro bets.
Scott Sadin, CEO of Integrity Compliance 360, said player props and micro betting present particular threats because a single person can have an outsized impact on the outcome. He argued for regulation rather than outright bans to avoid pushing activity offshore.
Cruz asked Miller whether sportsbooks should stop offering a bet if a league flags it as an integrity risk. Miller agreed they should.
Sen. John Hickenlooper raised a Kalshi social media campaign that featured a young woman claiming she could not pay rent until she started trading on the platform. He asked McHenry whether that was responsible marketing.
McHenry said event contracts are “not fully random” and claimed he was unaware of the ad.
McHenry pointed out that recent sports integrity scandals involving NBA and MLB players occurred on traditional sportsbooks, not prediction market exchanges. He said coalition members do not offer micro bets on things like the next pitch or play.
The hearing also drew attention for the inclusion of Dr. Harry Levant, a witness whose criminal past resurfaced before the session. The disbarred attorney pleaded guilty in 2015 to 13 felony counts for stealing $2 million from clients to fund his gambling addiction.
No sportsbook operators like DraftKings or FanDuel were invited to testify, which drew criticism from the sports betting community.
The bipartisan tone of the hearing may concern the prediction market industry. New Jersey is pushing for the Supreme Court to hear its case against Kalshi, and anti-prediction market sentiment appears to be growing in Congress.
