When new terms begin in January 2027 across the United States, many positions in both federal and state governments will have new faces and names. Some of these positions wield power that could impact the present and future for prediction market exchange operators.

Many of the prominent figures in state governments who are involved in current legal disputes between those governments and designated contract market operators will continue in those roles. There are several situations in which the potential impact is yet to be determined as well.

United States Congress control shifts to Democratic Party with unclear ramifications

The current Congress under Republican control hasn't taken much action to aid or detract from the interests of designated contract markets (DCMs), but it wasn't for a lack of proposals. Members of the current House of Representatives have submitted 23 bills and one resolution that concerns prediction market exchanges.

Democrats have been significantly more active on that front than their Republican counterparts. All but five of the 23 bills/resolutions have Democratic primary sponsors.

Still, some of the legislation that would affect the biggest changes has a Republican primary sponsor. For example, US Rep. Blake Moore's (R, Utah-1) H.R. 7840 carries a blanket ban of sports event contract trading that state governments could choose to opt out of.

Activity on the front of prediction market regulation doesn't seem to have been a significant negative for the campaigns of Congress members. Of those who were the primary sponsors of a bill or resolution in the current Congress and ran for election to the next Congress, only two lost their general election bids (Rep. Mariannette Miller-Meeks R, Iowa-1 and Rep. Bryan Steil R, Wisc.-1).

The same is true of the United States Senate. The composition of the chamber from January forward will still contain some of the members most active on issues related to DCMs.

2026 Senate elections had scaled-down but still significant activity

A total of 12 current members of the United States Senate have been primary sponsors of amendments or bills with implications for DCMs in 2026. Of those 12, nine of them did not face reelection in 2026.

That means all of the current members of the US Senate who originated legislation concerning prediction markets and sought reelection won their bids in 2026.

Those senators are Tom Cotton (R-Arkansas), Jeff Merkley (D-Oregon), and Roger Wicker (R-Mississippi). Like Moore, Merkley also presented a bill that bans sports event contract trading.

Democratic majorities may not spell doom for prediction market exchanges

At this time, the full impact of the new House of Representatives will hinge upon committee assignments that Democrats undertake. The chair of the US House Financial Services Committee, for example, will hold sway over which pieces of legislation could make progress in the body.

Congress members such as Rep. Ro Khanna (D, Calif.-17) filling crucial posts would be a negative development for exchange operators. Khanna called for a national ban on sports event contract trading on Nov. 10.

However, Democratic control of the chamber is not necessarily a explicit negative for DCMs. Rep. Josh Gottheimer (D, NJ-5) has introduced a bill friendly to prediction market exchanges, as just one example.

Additionally, other proposals from members who will be part of the next Congress merely dealt with imposing penalties for insider trading. That is accurate of the members who will remain parts of the Senate as well.

However, there are some scenarios in the Senate that may produce clear negative developments for DCM operators.

Outspoken critics in the US Senate could gain new influence

With Democrats holding at least 54 and as many as 56 seats in the Senate in January, Merkley and his allies could have new power to advance legislation. That could bear intrigue for DCMs.

Sens. Richard Blumenthal (D-Conn.), Chris Murphy (D-Conn.), and Adam Schiff (D-Calif.) all sponsored legislation that introduces new restrictions on trading. Sen. Elizabeth Warren (D-Mass.) has voiced a related but separate issue.

In July, Warren sent a letter to the Government Accountability Office, asking for an investigation into staffing cuts at the US Commodity Futures Trading Commission (CFTC). If Warren is able to escalate those concerns, it could mean hearings and subpoenas for CFTC officials and staff.

This is the situation from January in the federal government. Prediction market exchange operators are also concerned with developments in many state governments as well.

Blue wave reaches state governments in 2026

This month 46 of 50 US states held elections for either attorney general, governor, legislative seats, or a combination of those offices. The outliers in that context were Louisiana, New Jersey, Mississippi, and Virginia, where these offices will be up for grabs in 2027.

With vote counting still underway in a few tight races at this time, the results were overwhelmingly positive for Democrats from a national perspective.

  • Democrats flipped five governorships and are on track to hold every governor's office they controlled prior to the voting with Cindy Holscher holding a lead over Ty Masterson as vote counting continues. Democrats could pick up another flip if Jonathan Kreiss-Tomkins retains his lead in Alaska. If Holscher and Kreiss-Tomkins win, Democrats will count 30 governors among their ranks as of January.

  • Four Republican to Democrat flips occurred in state attorney general elections (Georgia, Iowa, Kansas, and Texas) so far with a fifth flip possible in Ohio as vote tallying continues. Should John Kulewicz prevail in Ohio, Democrats would feasibly control 30 state attorneys general offices in the new year.

  • In terms of state legislative bodies, Democrats gained incoming majorities in 12 chambers. That includes both houses in Arizona and Wisconsin. Due to the legislative majority changes in Michigan's House of Representatives and the Pennsylvania Senate, Democrats will control both chambers of those state legislatures starting in January.

  • Democrats broke the Republican trifecta (control of both chambers of the legislature and the governorship in a state) in Georgia, Iowa, New Hampshire, Ohio, and Texas while establishing six incoming trifectas for themselves. Vote counting still underway in North Carolina could establish a seventh incoming Democrat trifecta in that state.

  • From January forward, Democrats will have 22 trifectas (not counting North Carolina) compared to 17 Republican trifectas (counting Nebraska, which has a unicameral legislature but Republicans hold the governorship and the legislative majority).

Democrats flipped five governorships and are on track to hold every governor's office they controlled prior to the voting with Cindy Holscher holding a lead over Ty Masterson as vote counting continues. Democrats could pick up another flip if Jonathan Kreiss-Tomkins retains his lead in Alaska. If Holscher and Kreiss-Tomkins win, Democrats will count 30 governors among their ranks as of January.

Four Republican to Democrat flips occurred in state attorney general elections (Georgia, Iowa, Kansas, and Texas) so far with a fifth flip possible in Ohio as vote tallying continues. Should John Kulewicz prevail in Ohio, Democrats would feasibly control 30 state attorneys general offices in the new year.

In terms of state legislative bodies, Democrats gained incoming majorities in 12 chambers. That includes both houses in Arizona and Wisconsin. Due to the legislative majority changes in Michigan's House of Representatives and the Pennsylvania Senate, Democrats will control both chambers of those state legislatures starting in January.

Democrats broke the Republican trifecta (control of both chambers of the legislature and the governorship in a state) in Georgia, Iowa, New Hampshire, Ohio, and Texas while establishing six incoming trifectas for themselves. Vote counting still underway in North Carolina could establish a seventh incoming Democrat trifecta in that state.

From January forward, Democrats will have 22 trifectas (not counting North Carolina) compared to 17 Republican trifectas (counting Nebraska, which has a unicameral legislature but Republicans hold the governorship and the legislative majority).

These results have greater relevance for DCM operators in certain states.

Arizona

Attorney General (AG) Kris Mayes, who was the first to file criminal charges against a prediction market exchange operator and is currently seeking reversal of the injunction barring carrying forward with those charges, won reelection. Democrats taking control of the legislature and Gov. Katie Hobbs also winning another term means Mayes should have support in Phoenix.

Connecticut

AG William Tong also won another term. Tong has sued multiple prediction market operators over alleged violations of the state's gambling laws in relation to sports event contract trading.

Illinois

Illinoisans reelected AG Kwame Raoul, Gov. J. B. Pritzker, and strengthened the Democrats' majorities in both chambers of the state legislature. Those last two results bear relevance for a state that has enacted a statute specifically regulating sports event contract trading.

Iowa

Attorney General-Elect Nate Willems will inherit a dispute between outgoing AG Brenna Bird and Kalshi. That case is currently on hold while the US Eighth Circuit Court of Appeals considers an appeal from Kalshi, but Willems will have decisions to make regarding how to proceed following that decision.

Massachusetts

AG Andrea Joy Campbell's reelection means there will be no change at the head of the state's justice department as an appeal of Kalshi's lawsuit against Campbell is ongoing at the Fourth Circuit. The election won't have a material impact on Campbell's lawsuit against Kalshi in state court because of that result as well.

Michigan

Current AG Dana Nessel is term-limited, but AG-Elect Eli Savit is also a Democrat. Savit will face several decisions on how to proceed in state court and regarding agreements with several DCM operators who have committed to not offer sports event contracts to people in Michigan.

Minnesota

Gov.-Elect Amy Klobuchar will lead a strengthened Democratic trifecta in 2027, as Democrats now have enough of a majority in the House of Representatives to take full power. Under Democratic control of the Minnesota Senate and with Gov. Tim Walz's support plus a power-sharing agreement in the House of Representatives, Minnesota enacted the most restrictive statute affecting prediction market trading in the nation.

Minnesota officials are currently enjoined from enforcing the statute, but that ruling is on appeal. Without a sea change in the composition of the state government, there is little certainty about a potential repeal.

Nevada

AG-Elect Nicole Cannizzaro is replacing outgoing AG Aaron Ford, both of whom are Democrats. Cannizzaro has commented on prediction market legality on the record, stating that she believes that event contract trading should be subject to state regulation.

That stance could have significant weight within the next term as Nevada is a legal battleground over state sovereignty in this context. Two of the three petitions for review currently before the Supreme Court of the United States (SCOTUS) concern Kalshi v. Assad, in which Nevada Gaming Control Board member George Assad is the lead defendant.

New Mexico

AG Raul Torrez will serve another term. Torrez is one of several AGs throughout the country who has filed a civil suit against Kalshi for alleged violations of their states' gambling laws as they relate to sports event contract trading.

New York

AG Letitia James will continue in the office. James has been one of the most litigious AGs in terms of actions against DCM operators and her efforts have led to several operators restricting their offerings in New York already.

Gov. Kathy Hochul also secured another term, and Democrats built on their majorities in both chambers of the New York legislature. That could bear relevance in a state where legislature members have already filed bills to regulate DCMs.

North Carolina

North Carolina's outgoing legislature passed a unique bill that sanctions and taxes event contract trading ongoing in the state, and Gov. Josh Stein signed the measure. Stein isn't up for reelection until 2028.

However, Democrats have taken control of the lower chamber of the legislature and may do the same in the North Carolina Senate, putting Stein at the head of a potential Democrat trifecta. The worst-case scenario for Democrats in North Carolina right now is Republicans having a two-seat majority in the Senate.

That might mean that there wouldn't be enough votes to repeal the measure. However, due to the taxation portion of the law, DCM operators might be at least partially in favor of a repeal anyway.

Ohio

Interim AG Andy Wilson, a Republican, did not run for the office. The new office holder will face decisions in how to proceed with potential enforcement of cease-and-desist orders that the Ohio Casino Control Commission has already sent to several DCM operators concerning sports event contract trading.

Kulewicz has not commented on the situation so far, and the same goes for Republican candidate Keith Faber. However, prediction market exchanges might not consider a Faber win a positive, as the legal dispute started under the tenure of former Republican AG David Yost.

Rhode Island

AG Kim Ahern got approval for another term from voters. Ahern sued Kalshi and Polymarket in a state court in May, alleging that the platforms' sports event contracts violate Rhode Island law.

Wisconsin

AG Josh Kaul was a beneficiary of the strong performance for Democrats up and down the ballot in Wisconsin. Kaul has been among the most active in his office across the country in terms of filing lawsuits against multiple DCM operators to date.

2027 could be make-or-break year for sports event contract trading in the US

The number of judicial decisions on the legality of sports event contract trading pending between state courts, federal district courts, federal appellate courts, and SCOTUS in 2027. With possible exceptions in Iowa and Michigan simply due to the new AGs, the status quo seems unlikely to change in terms of enforcement actions against DCMs that have spurred much of the litigation behind those pending decisions.

While 2027 will start to answer questions regarding courts' stance on event contract trading and state sovereignty, the following year could do more to sway regulatory matters regarding prediction markets. The second Trump Administration has been favorable to DCM's interests, something that the next executive may not keep with.

With just weeks remaining in 2026, the stage and the cast is almost set for 2027. Let the show commence.