CT wants to crack down on 'Wild West' prediction bets. Why the White House is trying to stop them
Attorney General William Tong says "prediction markets" like Polymarket and Kalshi fall under Connecticut's gambling laws. But the White House is suing to stop him.
Wanna bet?
“Prediction markets” let you gamble on everything from gas prices to the color of President Donald Trump’s tie. But critics call them the “Wild West” of insider trading.
Now, Connecticut is locked into a battle with the White House over regulating the sites.
“WILD WEST”
On Kalshi and Polymarket, you can gamble on almost anything.
“There was one where you could bet on if the Costco hot dog was going to go, like, over $1.50 or stay the same,” said Nick Verrino, of Westchester County, N.Y.
But it’s not all fun and games.
“Polymarket and Kalshi operate in a Wild West,” said Sen. Richard Blumenthal. “A haven of market manipulation and insider trading, as well as underage gambling.”
Bettors have made millions wagering on the Iran War, including “death bets” on the Ayatollah’s assassination. Blumenthal believes that Washington insiders are profiting off insider information – leaving ordinary gamblers with big losses.
Donald Trump, Jr., is an adviser to both platforms.
“Right now, there are no rules,” Blumenthal said. “None, zero.”
CT RUNS INTO ROADBLOCK
Connecticut officials want to regulate prediction markets, but the Trump administration is suing to stop them.
The Commodity Futures Trading Commission filed a lawsuit against Connecticut and two other states, arguing that prediction markets are actually “derivative … ’swaps’ or futures contracts” – and not subject to state gaming laws.
“Our statute has very broad definition of the term ‘commodity’ and a very broad definition of the term ‘swap,’” CFTC chairman Michael Selig told the House Agriculture Committee on Thursday.
Selig said the commission is investigating hundreds of possible fraud cases.
“I want to be crystal clear to anyone who engages in fraud, manipulation, or insider trading in any of our markets. We will find you and the full force of the law will come to bear," he said.
Last week, a divided federal appeals court temporarily blocked New Jersey from regulating Kalshi’s sports betting platform. The Garden State claimed the site violates a ban on college sports wagers, but the Third Circuit said “the relevant event or occurrence need only be ‘associated with a potential financial, economic, or commercial consequence’” to fall under federal jurisdiction.
The case now heads back to a lower court.
Despite that, Connecticut Attorney General William Tong believes he has a winning hand.
“We’re going to win this case,” he told reporters at a Friday news conference. “Commodities futures are about energy, sugar, pork bellies … Trading on whether somebody has been assassinated or not has absolutely no economic value.”
Kalshi and Polymarket did not respond to requests for comment.
INCREASING SCRUTINY
Prediction markets’ luck may be running out. The apps are coming under increasing scrutiny from both Democrats and Republicans.
Blumenthal is sponsoring legislation specifically letting states like Connecticut regulate prediction markets, while Sen. Chris Murphy wants to ban bets on war, terrorism and other government actions.
“Any prediction market where somebody knows or controls the outcome of a bet is ripe for corruption,” said Murphy. “When events that involve good and evil, life and death become just another financial product, morality no longer matters and the soul of America is fundamentally corrupted.”
"HOW ARE YOU GOING TO REGULATE IT?"
But no matter what happens, some are “predicting” that prediction markets are here to stay.
“How are you going to regulate it?” asked Mike Flaherty, of Norwalk. “I don’t know. Shut the sites down maybe.” Verrino agreed.
“They could try,” he said. “I guess it depends on how exactly they want to regulate them.”
