Cruz to introduce bill shifting sports prediction oversight to states after midterms

Senator Ted Cruz (R-TX) plans to introduce legislation after the November 3 midterm elections that would require state or tribal authorization before prediction markets may offer event contracts tied to gambling, including sports, Bloomberg Law reported. The proposal would reverse the current federal-default model that permits Commodity Futures Trading Commission-registered exchanges such as Kalshi to list sports contracts nationwide.

What the bill would change

Under the draft Cruz proposal described in reporting, prediction exchanges registered with the Commodity Futures Trading Commission would no longer be able to rely on the federal framework alone to offer sports-related event contracts. Instead, an exchange would need explicit permission from a state government or a federally recognised tribe before listing gambling-related contracts in that jurisdiction. The bill, as reported, would not ban sports contracts outright but would leave the decision to states and tribes.

The legislation was not yet visible on Congress.gov at the time of reporting and is slated for introduction in the post-midterm, lame-duck window. The 119th Congress ends in early January, so a bill filed after November 3 would need rapid movement to pass this session or require reintroduction in the next Congress.

Why Cruz is proposing the change

At a Senate Commerce subcommittee hearing on May 20 about sports betting integrity and prediction markets, Cruz framed sports contracts as effectively being "sports bets." He raised two central questions: how to protect sporting integrity where legal betting exists, and whether prediction markets "are operating within the law, or are they defying the law and improperly infringing on state sovereignty." Cruz told the panel there is "serious disagreement about whether the CFTC can unilaterally allow prediction markets to offer sports events contracts pursuant to the Commodity Exchange Act." He said the courts are split and that, unless Congress acts, the Supreme Court may ultimately have to decide the issue.

Cruz emphasised the proposal was not intended to roll back state-authorised gambling. The bill's mechanism — requiring state or tribal authorisation — differentiates it from other pending federal proposals that would ban gaming-related contracts on CFTC exchanges outright.

How operators would be affected

If enacted as reported, the bill would flip the current operational baseline for firms such as Kalshi and other CFTC-registered exchanges. Today those platforms list sports event contracts under the federal CFTC framework and operate nationwide; under Cruz's approach, market access would depend on obtaining approvals from individual states or tribes.

That shift could materially affect operators' access to large markets. Texas, which prohibits sports betting and commercial casinos, represents a significant audience for prediction markets. Research from Eilers & Krejcik Gaming estimated that Texas and California accounted for 43% of Kalshi's volume, and that the 19 states without legal online sports betting together supplied 69% of Kalshi's volume. Requiring state permission could therefore curtail operations in jurisdictions that currently generate substantial traffic but explicitly ban sports betting.

The parallel legal and regulatory fights

Federal appellate rulings have split on whether the Commodity Exchange Act preempts state gambling laws for event contracts. The Third Circuit sided with Kalshi in April, finding the CFTC likely holds exclusive jurisdiction over its sports contracts in New Jersey; New Jersey has asked the U.S. Supreme Court to review that decision. The Ninth Circuit in August reached a different view, holding Kalshi likely could not show the Commodity Exchange Act preempts Nevada gaming law. In September a Sixth Circuit panel held Kalshi's sports contracts are not swaps and that federal law would not preempt Ohio and Tennessee gambling rules even if they were. The Tenth Circuit recently declined to block enforcement.

While Kalshi pursues appeals, state enforcement actions continue. Utah Attorney General Derek Brown sued Kalshi and two Susquehanna trading entities in Utah state court seeking to halt Kalshi's operations there and to recover profits.

At the same time, the Trump administration's Commodity Futures Trading Commission has moved in a different direction from Cruz's proposal. The CFTC adopted an interim final rule, effective Monday, that excludes casino-style gambling products such as sportsbook wagers from the swap definition. That exclusion applies only to off-exchange products offered by state- or tribal-supervised operators. The CFTC also published a companion proposal to define event contracts, including sports contracts, as swaps under the agency's jurisdiction.

Texas political backdrop

The stakes are high in Cruz's home state. Texas bans sports betting and commercial casinos; Lieutenant Governor Dan Patrick, who presides over the state Senate, has opposed state-level legalisation. In 2023 the Texas House passed a sports betting bill but Patrick refused to bring it to the Senate floor. Legalisation efforts in 2025 did not proceed. In 2026 Patrick directed the Senate State Affairs Committee to "study the sudden inundation of prediction market gambling" and to "make recommendations to ensure the integrity of Texas elections and Texas sports." The committee heard from Kalshi Head of Enforcement Robert DeNault and from American Gaming Association Vice President Tres York in September. DeNault warned prohibition would drive Texans to unregulated offshore platforms, while York said 85% of Kalshi's volume ties to sports and parlays.

Texas Attorney General Ken Paxton did not join the multistate group of 39 attorneys general and the District of Columbia who backed New Jersey's Supreme Court petition.

Legislative context and competing bills

Congressional Research Service notes other measures under consideration. Some bills, including the Prediction Markets Are Gambling Act and the Fair Markets and Sports Integrity Act, would categorically ban sports- and casino-style contracts on CFTC exchanges. Other proposals, such as the Event Contract Enforcement Act and the Prediction Markets Security and Integrity Act, would permit gaming-related contracts only where a state authorises them. Cruz's reported approach aligns with the latter group by vesting the gatekeeping decision with states and tribes rather than imposing a federal prohibition.

The coming weeks will determine whether Cruz files the legislation in the lame-duck session and whether it gains traction before the 119th Congress adjourns in early January.

"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 at the May 20 hearing.

"For all intents and purposes, sports bets," Cruz added, referring to sports contracts offered by prediction markets.