All 11 Democratic committee members of the Senate Banking, Housing, and Urban Affairs Committee asked Chairman Tim Scott on Wednesday to hold a public hearing on prediction markets, citing their growing effect on consumers and the financial system. The request, led by Ranking Member Elizabeth Warren and Catherine Cortez Masto, calls for a bipartisan session open to the full committee and follows a planned Republican-only roundtable that was expected to include Kalshi and CEO Tarek Mansour. According to the latest reports, the senators stated that "it is critical that Congress examine prediction markets on a bipartisan basis in a public hearing – not behind closed doors in a Republican-only, industry-friendly roundtable." The group emphasized that prediction markets touching corporate performance indicators are security-based and should be "subject to SEC regulation." Signatories include Elizabeth Warren, Catherine Cortez Masto, Jack Reed, Mark Warner, Chris Van Hollen, Tina Smith, Raphael Warnock, Andy Kim, Ruben Gallego, Lisa Blunt Rochester and Angela Alsobrooks, as reported by The Block.
The regulatory push comes as prediction markets experience unprecedented growth, with combined monthly global trading volume on Kalshi and Polymarket reaching approximately $53 billion in July, more than double the $25.7 billion recorded in May, according to a September 23 analysis from Pew Research Center using data from The Block. The Democrats cited this sharp increase in trading activity as a primary reason for congressional oversight. As reported by Pew Research Center, combined monthly volume on the two platforms had risen from less than $5 billion in September 2025 to about $24 billion in April 2026. The senators noted that this expansion has increased the number of retail and institutional participants exposed to prediction-market contracts. Individuals traded nearly $12 billion on the two platforms in December 2025, representing a 400% increase from the previous year, according to the latest committee letter. The controversy centers on whether prediction markets should fall under SEC or CFTC jurisdiction, with the Democrats now citing growing SEC questions over securities-linked products as a key concern.
Prediction markets are rapidly expanding beyond sports and politics into traditional financial markets, offering traders new ways to speculate on US stocks, indexes and company events while raising questions over investor protection and regulatory oversight. Polymarket International began offering markets on individual stocks last October, with traders wagering more than $220 million across about 31,000 equity-linked markets through early September, according to an analysis by blockchain research firm Allium prepared for Reuters. Almost 60% of the activity involved markets linked to individual stocks, with Nvidia, Alphabet, Apple and Tesla among the most actively traded names. The companies did not respond to requests for comment, as reported by Reuters. Kalshi does not currently offer contracts directly tied to individual stocks, but offers roughly 2,500 markets on a typical day, including contracts linked to stock indexes and corporate key performance indicators, covering events such as product launches and Tesla vehicle deliveries. Unlike traditional stock exchanges, prediction markets can operate around the clock and allow traders to take positions on a variety of outcomes related to a company or market.
The expansion of prediction markets has intensified a debate over which US regulator should oversee these products. The CFTC has argued that prediction markets fall within its jurisdiction because they involve derivative-like contracts, while there are growing calls for the Securities and Exchange Commission to play a larger role. Under US law, contracts linked to individual stocks are generally treated as security-based swaps, which fall under SEC oversight and are subject to restrictions that generally limit participation to professional investors. Some contracts linked to corporate KPIs could potentially fall within the same category, according to legal experts cited by Reuters. Polymarket's offshore structure has added another layer to the regulatory debate, as the platform is largely outside the direct reach of US regulators, potentially making it more difficult for authorities to monitor trading activity and investigate possible misconduct. The SEC and CFTC jointly sought public feedback in June on the regulatory treatment of prediction markets and whether one agency should have primary oversight. Traditional financial firms and consumer groups have argued that the SEC should take the lead because of its experience overseeing securities markets.
The lawmakers cited significant concerns about manipulation and insider trading in prediction markets. They referenced research warning that participants with access to nonpublic information could have an advantage in markets tied to events or corporate outcomes. A June 2026 academic paper examining Polymarket activity found that trading profits were concentrated among a small share of users during the study period. The regulatory debate also extends to the potential use of non-public information, with experts cited by Reuters saying that corporate KPI contracts could create opportunities for traders with access to confidential company information to profit from upcoming events, potentially raising issues similar to insider trading in conventional stock markets. Studies have also found that most retail traders lose money in prediction markets, as reported by Reuters. Senator Adam Schiff, a California Democrat, told Reuters that Congress should ensure prediction-market operators cannot avoid securities regulations simply by structuring conventional financial products as prediction contracts.
