Nine Democratic lawmakers in the US House of Representatives have called on the Federal Trade Commission to launch a probe into how prediction markets are advertising to customers compared to how they present themselves to regulators.
In a statement on Wednesday, US Representatives Kevin Mullin and Gabe Vasquez said the FTC should investigate whether online prediction market platforms are misleading customers by advertising as gambling platforms while telling regulators they are financial tools offering investment products.
Prediction markets allow users to trade contracts on the outcome of future events. They have also been facing scrutiny over insider trading, with Congress launching a probe into Polymarket and Kalshi in May and questioning the companies’ responses to insider-trading incidents on their platforms.
The Democratic lawmakers allege that prediction market platforms use language associated with sports gambling, including legal betting and betting on sports without a sportsbook, while attempting to evade state gambling regulations.
A group of nine Democratic lawmakers is calling on the FTC to launch a probe into prediction markets. Source: Kevin Mullin
“These prediction market companies are presenting themselves differently to regulators than they are to the public, and that kind of contradictory messaging can mislead consumers about what rules and protections actually apply,” Mullin said.
“We are urging the FTC to investigate these practices and ensure consumers are protected from this potentially deceptive activity,” he added.
In their letter, the lawmakers are also asking the FTC for detailed information by June 29 on whether it has plans to take investigative or enforcement action against prediction market platforms for possible deceptive practices.
Related: Kalshi bans 3 US politicians for betting on their own election races
At the same time, the lawmakers have asked whether the FTC has received complaints about prediction markets and if the FTC considers public perception and legal filings when determining if a company has engaged in possible deceptive practices.
US Representatives Jared Huffman, Raul Ruiz, Salud Carbajal, Mike Levin, Dina Titus, Paul Tonko, and Valerie Foushee have also signed the letter.
Prediction markets have emerged as a significant real-world use case for blockchain, with some platforms relying on crypto rails and stablecoins for settlement and payments.
In March, transactions hit record highs amid growing interest in political and geopolitical event contracts, improved accessibility and positive regulatory developments for the industry.
Magazine: Big Questions: Do we really only need 2–5 cryptocurrencies?