Prediction markets, integrity dominate conversation at US Senate hearing on sports betting
When Congress last convened for a federal hearing on sports betting, trading for event contracts remained largely confined to political outcomes, namely the 2024 US presidential election, held several weeks earlier.
While Kalshi handled more than $175 million in trading volume on Donald Trump’s victory over Kamala Harris, the upstart site was still weeks away from listing derivatives on sports. Nearly 20 months later, the trading environment for the financial products has changed dramatically, with Kalshi’s valuation ballooning to $22 billion. On Wednesday, duelling factions on federal regulations on sports wagering squared off in a testy hearing on Capitol Hill.
As with the previous incarnation in December 2024, the hearing ended with considerable ambiguity about whether Congress will craft legislation to help police the multibillion-dollar industry. But a rash of scandals ensnaring multiple sports leagues, combined with insider trading allegations on prediction markets has raised fresh questions on Congress’ role in protecting the market from fraud and abuse. Senator Marsha Blackburn, chair of the Senate Commerce Subcommittee on Consumer Protection, Technology and Data Privacy, convened the hearing , titled “No Sure Bets: Protecting Sports Integrity in America”.
The swath of high-profile betting scandals is widening across leagues and sports – last month, a former NBA assistant coach pleaded guilty to disseminating inside information on the injury status of a player to a group of bettors, who used the tip for financial gain. Two MLB pitchers are awaiting trial on pitch-rigging charges, while the lead defendant in a college basketball point-shaving scandal is scheduled to be sentenced next month.
“When Americans watch their favourite sports team, they don’t want to worry about the game being rigged. They don’t want to worry that their favourite player missed a free throw to make an extra buck on the side,” Blackburn said in opening remarks.
Combating illegal wagering at the World Cup
Ahead of the hearing, Deutsche Bank released projections that the US handle from the World Cup could top $4 billion. The US is partly hosting the momentous event, which runs from 11 June to 19 July, for the first time in 32 years. At the previous hearing in 2024, Blackburn cited studies which demonstrated that about 10% of organised crime revenue from foreign enterprises is derived from illegal sports betting.
She also referenced findings from the United Nation’s Office of Drugs and Crime which found that at least $140 billion is laundered annually through illegal and unregulated sports betting operators. At the time, Blackburn inquired with the Justice Department on whether there were any connections between match-fixing and transnational organised crime.
Last month, former NBA guard Damon Jones pleaded guilty for taking part in a series of rigged poker games that were backed by members of the La Cosa Nostra crime families. Separately, Jones pleaded guilty to disseminating inside information to a group of bettors on an injured NBA player that fit the description of LeBron James.
FIFA, for its part, has made a concerted effort to crack down on threats to integrity before the quadrennial event. Earlier this month, FIFA held a summit with members of its integrity task force, a group dedicated to mitigating the risks of match manipulation. FIFA’s integrity workshops have brought together some of the world’s foremost law enforcement agencies, including the FBI, Interpol and the UNODC.
The World Cup could serve as a litmus test for the FBI in fending off potential threats from organised crime during the 2028 Los Angeles Summer Olympics.
“Hearings like today establish a baseline that will help us forward that information to be certain that the FBI is watching for this,” Blackburn told iGB inside the Russell Senate Building.
Facing the music
A hearing aimed at restoring integrity to sports quickly devolved into a referendum on prediction markets. The event morphed into a symbolic “food fight” between the competing factions, which one industry insider had predicted to iGB beforehand. Patrick McHenry, senior advisor for the Coalition for Prediction Markets, faced a litany of questions as to whether the platforms contain the requisite consumer safeguards.
Colorado Senator John Hickenlooper described an anecdote of a prediction market enlisting a 15-year old influencer to promote the product on social media. McHenry said he was unaware of the campaign, but indicated that he “welcomes the conversation” with Congress on the implementation of safeguards to protect minors from accessing the platforms.
Furthermore, he said members of the coalition engage in “enhanced surveillance” when they have reason to believe a minor is using a parent’s phone to trade on a prediction market. Blackburn asked whether coalition members target minors through advertising, and she posed the same question to American Gaming Association President Bill Miller as it relates to commercial sportsbooks. Both stated conclusively that their operators do not.
The two were joined by Mary Beth Thomas of the Tennessee Sports Wagering Council, Scott Sadin of IC360 and Harry Levant, a nationally recognised expert on gambling addiction. New Mexico Senator Benny Ray Lujan polled the witnesses on how Congress should intervene on regulatory treatment of sports event contracts. Miller argued that Congress should reaffirm the rights of states and tribes, a view shared by Thomas.
Conversely, McHenry indicated the coalition is willing to work with legislators if Congress decides to assert its authority. Still, he argued that regulation of the derivatives on sports fall under the jurisdiction of the US Commodity Futures Trading Commission, citing a recent decision by the US Court of Appeals for the Third Circuit.
Working collaboratively with the leagues
When asked by iGB if Congress should work with the leagues in an attempt to mitigate comprehensive integrity risks, Hickenlooper demurred, indicating it is a difficult question worth exploring further.
Texas Senator Ted Cruz chairs the larger Senate Committee on Commerce, Science and Transportation, which Blackburn’s subcommittee sits under. Cruz spoke at length on the gravity of the sports betting scandals, informing the panel of others facing Major League Soccer and the UFC. Cruz will be joined by Washington Senator Maria Cantwell in conducting a bipartisan inquiry into how the leagues, sportsbooks and stakeholders are protecting the integrity of sports.
Any proactive measures to ameliorate the ills that erode trust among fans could be music to the ears of leading integrity monitors. Among the main takeaways from the hearing surrounds the potential for the leagues to work proactively with Congress to streamline the integrity monitoring process. One option could be the completion of a Memorandum of Understanding comparable to one Major League Baseball recently signed with the CFTC. On Thursday, the Commission disclosed that it had completed a separate MOU with the NHL.
iGB reached out to the NFL, NBA and MLB for comments on Wednesday’s hearing, but none responded. Earlier this month, the NFL sent a letter to the CFTC with a recommendation for restrictions on certain trades it considers objectionable. CFTC Chairman Michael Selig did not attend the hearing on Wednesday.
A federal framework by 2030?
Despite the practicality of a public-private partnership on integrity, any discussions between Congress and the leagues on a potential MOU may be fraught with complexity. Nevertheless, academic experts have researched a bevy of initiatives that could help facilitate the detection and enforcement of potential match-fixing schemes.
Matt Bakowicz serves as director of the Sports Business Management track within American University’s Kogod School of Business. Before he joined the AU faculty, Bakowicz served as manager of gaming operations at Foxwoods Resort Casino, where he oversaw DraftKings Sportsbook and Racebook operations. Bakowicz has proposed a federal baseline for sports integrity, which may include the following:
- Mandatory suspicious wager reporting
- Standardized information sharing protocols
- Independent integrity monitoring
- Privacy protected data sharing between leagues and operators
- Consistent rules for high-risk markets
“In short, Congress can be useful here, but the goal should be coordination and enforceable minimum standards – not a one-size-fits-all federal takeover of sports betting policy,” he told iGB.
Next steps
On the other end of Capitol Hill, members of the House of Representatives watched the hearing closely. New York Representative Paul Tonko has proposed a federal framework for the regulation of sports wagering.
“Anyone who cares about the integrity of sports should support federal protections to rein in this out-of-control industry. I’m heartened that the Senate is holding this hearing,” Tonko wrote in a statement.
The New York congressman is optimistic that the House will hold a hearing on sports wagering in the relative near future.
Blackburn did not guarantee that a bill with federal standards on sports wagering will be signed into law by 2030. However, she indicated that the prospect of adoption depends on how quickly Congress progresses with its exploration of the subject, while adding that there is interest from members on the panel to move forward.
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