The mid-term election brought some major changes to the political landscape with Democrats capturing control of the House and Senate at the federal level. While gambling issues weren’t directly on the ballot in most states, new leadership could impact the growing prediction market industry.
Operators like Kalshi and Polymarket have battled in court with states over the last two years after they began offering event contracts on sports in 2025. State gaming regulators allege these companies are violating state gaming laws.
Prediction markets counter that their contracts are different from traditional sports betting and are only regulated at the federal level by the Commodity Futures Trading Commission. The CFTC has sought to assert that control and the Trump administration has been a major proponent of the growth of the industry.
Democrats have been more leery of prediction markets, alleging concerns not only about what many consider illegal gambling, but also over possible insider trading. That may leave prediction market users and insiders wondering where the industry goes from here.
No change for prediction markets yet
In September, New Jersey Atty. Gen. Jennifer Davenport asked the Supreme Court to take up the issue of prediction markets and the ability of states to regulate their sports offerings. This followed two different federal appeals court decisions. The Third Circuit Court of Appeals ruled 2-1 in April against New Jersey and the Ninth Circuit recently ruled 3-0 for Nevada in a case involving Kalshi.
The legal murkiness makes a Supreme hearing likely, according to legal experts. New Jersey’s appeal asks whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempts states from regulating sports event contracts.
Bob Jarvis, a law professor at Nova Southeastern University in Florida who specializes in gaming, believes that possibility holds more meaning after Tuesday’s election. He does not believe the mid-terms will have any major impact on prediction markets.
“The issue of their legality now is firmly before the courts, and I believe that the U.S. Supreme Court will agree to hear New Jersey’s challenge to Kalshi,” he said. “In addition, the Democrats have too many other irons in the fire.”
Had the Republicans won…
However, Jarvis argues a different outcome on Tuesday may have held some sway about a case potentially before the Court.
“I do think that the mid-terms weakened Trump, and to that extent his defeats last night might have some influence on New Jersey’s case,” he said. “Trump is an ardent proponent of prediction markets, of course, and if he had won decisively last night the Supreme Court, which has been doing Trump’s bidding, might have given his side of the argument more attention than it now is likely to do.”
In the end, Jarvis believes the Court will eventually side with states on the issue. Had the Republicans won, Jarvis believes that scenario would only change the margin by which New Jersey will win the case, not the actual outcome.
Congressional inquiries possible
Sports and gaming attorney Daniel Wallach regularly tracks the maneuverings surrounding prediction markets on social media. He has a different opinion and believes the election results could have a significant impact on the industry, particularly sports event contracts.
A Democratic-controlled Congress is likely to take a harder look at an industry that has grown rapidly under the Trump administration, according to Wallach. He believes the administration has chosen not to enforce existing federal regulations against event contract exchanges.
“There are serious questions about whether these contracts constitute unlawful gambling under existing state and federal law, and whether consumers are being exposed to products that lack the protections required in regulated gaming markets,” he says. “That could prompt congressional hearings, investigations, pressure on the CFTC, and potentially legislative proposals.”
CFTC Chairman Mike Selig is likely to face questions from Congress, Wallach says. Before joining the agency, Selig represented venture capital firm Paradigm in a 2024 filing urging the CFTC to recognize the legitimacy of prediction markets.
Paradigm subsequently invested in Kalshi, Wallach says. Now, as chairman, Selig is leading the CFTC’s efforts to defend the agency’s jurisdiction over these markets and to shield the industry from state regulation. That could attract considerable congressional scrutiny.
State-level election results potentially open up new fronts for enforcement. Georgia and Texas both flipped to Democrat governors and attorneys general, and could become enforcement states under new leadership.
“In Texas, Ken Paxton’s departure from the AG’s office is significant in its own right,” Wallach says. “Paxton had notably declined to join the broader state-led enforcement effort against prediction markets, as Kalshi and its CEO made contributions to Paxton’s political committees.
“Kalshi has also contributed to the Republican Attorneys General Association, which supports Republican AG candidates across the country. Iowa is another state to watch. The current AG successfully defended Kalshi’s preemption lawsuit while representing that she had no intention of bringing enforcement proceedings. A change in leadership could alter that position.”
Trump can veto prediction markets issues
Democrats and Republicans alike have both introduced legislation to regulate prediction markets. In March, Sen. John Curtis (R-UT) put forward the Prediction Markets Are Gambling Act. The bill is co-sponsored by Sen. Adam Schiff (D-CA) and seeks to ban operators from offering sports event contracts and similar markets resembling gambling.
In January, Rep. Ritchie Torres (D-NY) filed legislation barring federal employees from using prediction markets over insider trading concerns. In September 2025, a bipartisan group of federal lawmakers sent a letter to the CFTC pushing for additional regulations.
With Democrats now controlling Congress, the industry could face even more pushback from legislators. The president and Congress will be at odds at least to some degree over the next two years, said I. Nelson Rose, a leading expert on gambling law and publisher of the Gambling and the Law blog.
“Since his son Donald Trump Jr. has multimillion dollar investments in Kalshi and Polymarket, President Trump will veto any bill that would limit prediction markets and affect his own family’s wealth,” he said. “On the other hand, we have seen the U.S. Supreme Court stands up to Trump when he is so clearly wrong on the law and the American people are strongly against his policies, such as with tariffs and birthright citizenship.
“Because prediction markets are not commodities as their market makers claim and the Trump administration’s position is forcing states like Utah to have unregulated sports gambling, I think there is a good chance the Supreme Court will rule that prediction markets are gambling to be controlled and in most cases outlawed by the states.”
While legislators are concerned with sports offerings and insider trading, some prediction market executives pointed to the success of the platforms in successfully forecasting Tuesday’s outcomes. The crowd-sourcing approach is good for the political landscape, according to Polymarket CEO Shayne Coplan.
“I know the industry has gained a mixed rap for a variety of reasons, many of which are criticisms with real merit,” Coplan noted on X Wednesday. “But I think I speak for both myself and my peers when I say we got into this because we really love the idea of markets being able to place a price on the future (e.g. Democrats had a 92% chance to take the House on Polymarket), and how that can help people better understand what’s likely to happen and make decisions accordingly.”
