US Sen. Ted Cruz is preparing legislation that would give state and tribal governments authority over sports-related contracts offered by prediction markets.
Cruz intends to file the bill after the November 3 midterm elections, as per Bloomberg Law. The measure would bar prediction market operators from offering contracts linked to gambling activities, including sports betting, without approval from the relevant state or tribal government.
The proposal could change how platforms such as Kalshi operate. Exchanges registered with the Commodity Futures Trading Commission (CFTC) currently offer sports event contracts nationwide under a federal framework.
The legislation has yet to appear on Congress’ website. Its expected introduction after the midterm elections would leave lawmakers with little time to pass it before the 119th Congress ends in early January.
Cruz’s home state of Texas could be significantly affected by the proposal. The state prohibits sports betting and casinos, making prediction markets an alternative for residents seeking sports-related contracts.
Texas Lt. Gov. Dan Patrick has been a major obstacle to sports betting legalisation. A sports betting bill passed the Texas House in 2023, but Patrick did not allow it to proceed in the Senate. Legalisation efforts also failed in 2025.
Eilers & Krejcik Gaming estimated that Texas and California accounted for 43% of Kalshi’s trading volume. The 19 states without legal online sports betting collectively accounted for 69% of its volume.
Earlier this year, Patrick directed the Senate State Affairs Committee to study prediction market gambling and recommend measures to protect the integrity of Texas elections and sports.
The committee heard from Kalshi Head of Enforcement Robert DeNault and American Gaming Association Vice President Tres York in September. DeNault warned that prohibiting prediction markets could push Texans towards unregulated offshore platforms, while York argued that 85% of Kalshi’s volume comes from sports and parlays.
Texas Attorney General Ken Paxton has not joined attorneys general from 39 states and the District of Columbia in supporting New Jersey’s petition asking the US Supreme Court to review a ruling involving Kalshi’s sports contracts.
Cruz’s proposal comes amid an ongoing dispute over whether federal regulators or state governments have authority over sports event contracts. The Third Circuit Court of Appeals sided with Kalshi in April, finding that the CFTC likely has exclusive jurisdiction over its sports contracts in New Jersey. New Jersey subsequently asked the Supreme Court to review the decision.
Other courts have taken different positions. The Ninth Circuit ruled in August that Kalshi likely could not establish that the Commodity Exchange Act preempts Nevada’s gambling laws as applied to its sports contracts. A Sixth Circuit panel ruled in September that Kalshi’s sports contracts are not swaps and that federal law would not preempt Ohio and Tennessee gambling laws even if the contracts were classified as such.
The Tenth Circuit declined last month to stop enforcement action against Kalshi. Utah Attorney General Derek Brown subsequently sued Kalshi and two Susquehanna trading entities in state court, seeking to stop their operations in Utah and recover profits. Kalshi is appealing the earlier decision.
Cruz raised concerns about prediction markets at a May 20 Senate Commerce subcommittee hearing on sports betting integrity and prediction markets. He said the debate centred on protecting sports integrity and determining whether prediction markets operate within the law or infringe on state authority.
Cruz described sports event contracts as “for all intents and purposes, sports bets” and called on Congress to address disagreements over the CFTC’s authority.
“There is serious disagreement about whether the CFTC can unilaterally allow prediction markets to offer sports events contracts pursuant to the Commodity Exchange Act,” Cruz said. “Many simply see prediction markets as a workaround to state gambling laws. The courts are split. Ultimately, unless Congress acts, the Supreme Court may have to decide the issue.”
His planned legislation would not ban sports contracts outright but would give states and tribes control over whether operators could offer them.
The proposal differs from other bills before Congress that would prohibit sports and casino-style contracts on CFTC-regulated exchanges altogether. These include the Prediction Markets Are Gambling Act and the Fair Markets and Sports Integrity Act.
The Trump administration has pursued a different regulatory approach. The CFTC adopted an interim final rule, effective Monday, that excludes casino-style gambling products such as sportsbook wagers from the definition of swaps when offered off-exchange by state- or tribal-supervised operators.
A related proposal would classify event contracts, including sports contracts, as swaps under the agency’s jurisdiction.