House Democrats Seek FTC Probe of Prediction Markets

This week, a coalition of nine House Democratic reps formally asked the Federal Trade Commission (FTC) to look into prediction market platforms. The lawmakers are questioning whether these companies are engaging in deceptive practices by presenting contradictory identities to the public versus government watchdogs.

Led by Reps. Kevin Mullin and Gabe Vasquez, the nine lawmakers point out a sharp contrast in how prediction market apps operate. Sports betting vocabulary is widely used in promotional material, since these services are promoted as an alternative form of gambling to traditional sportsbooks, like the best sports betting sites.

Nevertheless, during communications with financial regulatory bodies, these websites refer to themselves as legitimate investment websites offering sophisticated financial instruments.

While prediction markets have surged in popularity, they are also facing mounting pressure from Washington. Just last month, Congress launched an investigation into major platforms Kalshi and Polymarket over allegations of insider trading and how those companies managed internal conflicts.

The newest congressional inquiry gives the FTC until June 29 to clarify if it will launch an official probe or take enforcement action against these operators for misleading the public. Additionally, Mullin and Vasquez are pushing to know if consumers have already filed complaints, and whether the FTC systematically checks for discrepancies between a company's promotional ads and its official regulatory disclosures.

The letter was also signed by Representatives Salud Carbajal, Valerie Foushee, Jared Huffman, Mike Levin, Raul Ruiz, Dina Titus and Paul Tonko.

Congress moves to study health impacts of the sports betting boom

The mounting congressional pressure on prediction markets is part of a broader legislative push to address the massive expansion of gambling across the US. Highlighting this effort, Representatives Dan Goldman and Blake Moore recently introduced the bipartisan Gambling Disorder Health Study Act.

In addition, the bill aims to obtain federal funds to conduct an extensive study that can determine the causes, development, and impacts of pathological gambling on society. Studies show that the Internet has created a significant transformation in the gambling habits of Americans, since more than 25% of American citizens have online betting accounts.

Additionally, 33% of American males of the same age group have used event-driven prediction markets for sports-related betting.

However, despite the high rate of usage of Internet gambling websites by Americans, the US federal government still does not have any particular entity working on research into gambling addiction among its priorities. This gap persists even as Internet searches for gambling help have jumped 23% since 2018, and an estimated 2% to 3% of the US population now shows signs of a gambling disorder.

Per the proposed legislation, the funds for conducting the study across the nation will be derived from the federal excise tax on state-approved wagering over the course of three years, using 10% of such tax revenues.