Summary

  • Democrats’ control of both the House and Senate is poised to bring stronger congressional regulation and oversight of prediction-market platforms such as Kalshi and Polymarket.
  • Democratic lawmakers said they will closely review the legality of prediction markets tied to real-world events such as elections and wars, as well as the potential for insider trading, while pursuing legislative action and tighter regulation.
  • As Democrats signal broader probes into crypto companies linked to the Trump family, Kalshi and Polymarket could become major oversight targets, prompting the industry to strengthen its policy response in Washington and its communication with Congress.

Forecast Trend Report by Period

Democrats’ capture of both chambers of Congress in the U.S. midterm elections stands to bring tighter congressional regulation and oversight of prediction-market platforms including Kalshi and Polymarket.

Politico reported on November 8 that Democratic lawmakers plan to closely scrutinize the legality of prediction markets tied to real-world events such as elections and wars, along with the potential for insider trading. The industry, which expanded rapidly during the Trump administration, could face a tougher regulatory backdrop.

Sen. Jeff Merkley, a Democrat, has raised concerns about betting on elections, wars, assassinations, terrorism and government policy, arguing that congressional legislation is needed. Rep. Maxine Waters, a Democrat seeking the chair of the House Financial Services Committee, has also said she would push for tighter regulation of platforms including prediction markets.

Shortly before the midterm elections, Sen. Elizabeth Warren, a Democrat, and Republican Sen. John Curtis sent a letter to the chief executives of Kalshi and Polymarket questioning the legality of election-related prediction markets and the regulatory framework around them. The U.S. Supreme Court is also weighing whether to hear a case related to oversight authority over prediction markets.

The regulatory push is also drawing attention to ties between prediction-market companies and President Donald Trump’s family. Donald Trump Jr., the president’s eldest son, serves as an adviser to Kalshi and Polymarket, and his investment firm has also invested in Polymarket. As Democrats prepare to broaden investigations into crypto companies linked to the Trump family, prediction markets could also emerge as a major oversight target.

Kalshi and Polymarket drew notice in the midterms after predicting Democratic victories in both the House and Senate relatively early. Still, they failed to correctly call some races, including the gubernatorial contests in South Carolina and Texas. The two platforms maintain they are not merely tools for forecasting election outcomes, but financial markets that help investors manage risks tied to political and economic events.

The industry is stepping up its engagement with Congress in response to regulatory concerns. Kalshi has recently hired Democratic figures and expanded its policy operation in Washington. In a November 2 letter, John Bibona, Kalshi’s head of federal government relations, wrote that the company had conducted more than 12 investigations into election-related trading and had procedures in place to prevent insider trading and market manipulation.

Polymarket has likewise said it operates a trading platform with safeguards for market integrity and customer protection. Kalshi Chief Executive Officer Tarek Mansour said he would follow the proper process if asked to appear before Congress and would continue working with lawmakers from both parties.

Suehyeon Lee