Lawmakers Seek Limits on War-Based Prediction Markets

TLDR

• Senate Democrats introduced the Death Bets Act to ban prediction markets tied to war, terrorism, assassination, and individual deaths.
• The bill would amend the Commodity Exchange Act and remove the CFTC’s discretion over approving such contracts.
• Rep. Mike Levin introduced companion legislation in the House, while Rep. Jamie Raskin advanced a related measure.
• Lawmakers said recent contracts linked to military strikes and assassinations raised concerns about insider trading risks.
• The CFTC recently withdrew a proposal that would have broadly banned political event contracts under its prior framework.

Senate Democrats moved to restrict event-based trading by introducing new legislation targeting contracts linked to violence and death. Sen. Adam Schiff unveiled the DEATH BETS Act to bar exchanges from listing contracts tied to war, terrorism, assassination, or fatalities. Lawmakers framed the proposal as a direct response to recent regulatory shifts at the Commodity Futures Trading Commission.

Lawmakers Target Prediction Markets Under Commodity Exchange Act

Schiff introduced the DEATH BETS Act to amend the Commodity Exchange Act and remove CFTC discretion. He said the bill would explicitly prohibit contracts involving terrorism, war, assassination, or an individual’s death. He stated, “There is no justification for gambling on lives, or public benefit to be derived by such a market.”

He added, “Betting on war and death creates an environment in which insiders can profit off classified information.” Rep. Mike Levin announced companion legislation in the House to mirror the Senate effort. Rep. Jamie Raskin separately introduced the Banning Games on Deaths and Elections Act in the House.

Raskin said election gambling contracts threaten democratic integrity and public trust. His bill would categorize such contracts as contrary to the public interest under federal law. Lawmakers said the changes would create a clear statutory basis for blocking these listings.

The CFTC currently holds the authority to block certain contracts if they conflict with public interest standards. However, enforcement depends on agency leadership and interpretation. Schiff’s bill would remove that flexibility and codify explicit prohibitions.

CFTC Rule Shift and Market Response

The proposal arrives as the CFTC revises its approach to regulating prediction markets. In February, the agency withdrew a 2024 proposal that would have broadly banned political event contracts. CFTC Chair Mike Selig criticized the prior plan and called it regulatory overreach.

Lawmakers cited recent trading activity tied to geopolitical events. Reports showed that traders wagered nearly $500 million on the timing of potential U.S. military strikes on Iran. One trader reportedly earned $553,000 from a contract linked to the assassination of Iran’s Supreme Leader.

Kalshi and Polymarket handled Iran-related contracts differently, which drew regulatory attention. Kalshi voided its Supreme Leader contract over language issues, while Polymarket settled its market. The outcome produced $679 million in conflicting market results.

Kalshi previously won a court challenge that allowed it to resume U.S. election betting. The Banning Games on Deaths and Elections Act seeks to reverse that outcome through legislation. Polymarket recorded over $3.6 billion in wagers during the 2024 presidential cycle.

Bitcoin fell 1.8% overnight and dropped below $70,000 during the broader market reaction. The cryptocurrency later traded at $69,500 during early sessions. Lawmakers said both bills aim to clarify federal standards governing event-based contracts.

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