During Wednesday’s Senate hearing on sports betting (which really ended up being a hearing on prediction markets), former congressman Patrick McHenry, who is now a senior advisor for the Coalition for Prediction Markets and who used to chair the House Financial Services Committee, basically compared betting on whether a pitcher throws a ball or a strike to a farmer buying crop insurance.
His point was that a prediction market is just a swap. People have been hedging against uncertain outcomes for 100 years. Grain futures, acts of God, crop yields, balls, strikes.
Then, Sen. Ted Cruz asked what the economic consequence would be of whether a pitcher throws a ball or a strike.
McHenry didn’t really have an answer. He said it was “up to the consumers to decide that” under the swaps definition, and that the courts and Congress could sort out whether they like it.
He then brought up onions, pointing out that under the Commodities Exchange Act, you literally cannot trade onion futures, because Congress banned them in 1958. His point was that the law draws strange lines and can draw new ones.
True enough. But no one was buying it.
No one. Like, nobody.
Cruz, a Texas Republican, and Sen. John Hickenlooper, a Colorado Democrat, were on the same page. So was Sen. John Curtis, a Republican from Utah, where gambling is flat-out illegal. Bill Miller from the American Gaming Association pointed out that 41 attorneys general — red, blue, and everything in between — signed a letter telling the Commodity Futures Trading Commission, in essence, to knock it off.
My favorite moment was when Harry Levant (I’ll save my Levant notes for another day), who is not exactly, shall we say, pro-gambling, looked over at Miller and said, “Mr. Miller and I are agreeing on an issue.”
That issue, of course, is prediction markets, and how they are both against them. As was everyone else at the hearing. McHenry looked a little shell-shocked, overall.
Death to PMs!(?)
So if you go by the temperature in the room, prediction markets offering sports contracts are on the endangered species list.
Except the room won’t — or at least almost certainly won’t — decide any of this.
A Senate subcommittee hearing isn’t a threat. It’s a hearing. It’s a long way from a law.
The real fight isn’t in the Senate anyway, as we all know. It’s in the courts, and they can’t agree. One in New Jersey has sided with Kalshi. Another in Tennessee has, too. One in Maryland didn’t. A judge in Ohio ruled against Kalshi in March. Nevada currently has a court-enforced ban in place. Arizona filed criminal charges. That’s the kind of split that will probably have the Supreme Court looking at all this like a frat boy checking out the new Tri-Delt pledges.
And even if one of the many bills in Congress seeking to rein in prediction markets somehow gets through, it’s not being signed by the current occupant of 1600 Pennsylvania Ave.
So yes, the Senate spent a day beating up on prediction markets. It was bipartisan, and a lot of it was fair and/or obvious.
It also probably won’t change much, and by “much,” I mean “anything.”
If you want to know whether prediction markets survive, don’t watch the Senate. Watch the courts. Or watch Polymarket, where, as of Wednesday afternoon, traders gave a 23% chance that SCOTUS accepts a sports event contract case by Dec. 31.
