Midterm Shift: Democrats poised to tighten oversight on prediction markets and CFTC

Polls indicate that Democrats are on track to win control of the House of Representatives in the coming month. A shift in leadership would likely increase the likelihood that pending bills regulating prediction markets pass committee, while also expanding the scope of investigations into the industry's regulatory ties.

Lawmakers have introduced nearly 30 bills related to prediction markets in the House and Senate since 2025. Most of these proposals originated with Democratic House members. The legislation primarily aims to restrict members of Congress and their staff from trading on the platforms or to prohibit specific contract types, such as sports-related bets. None of these measures has yet passed into law.

The issue has not divided strictly along party lines, with supporters and critics present on both sides of the aisle. However, a Democratic majority could leverage committee investigative powers to examine specific relationships between the platforms and the White House. Donald Trump Jr., the president's son, serves as an adviser to Kalshi and Polymarket. His venture capital firm, 1789 Capital, has also invested in Polymarket.

A spokesperson for Trump Jr. stated that he does not sit on the investment decision-making committee for 1789 Capital and that his advisory role for the platforms is separate from the firm's investments. Another spokesperson described the concerns as politically motivated, noting that Trump Jr. does not deal with the federal government on behalf of the companies he advises. Kalshi CEO Tarek Mansour acknowledged that the connection creates an optics issue, though he said it has never been used to gain favor. Sen. John Curtis of Utah has separately called for a probe of these interests.

Both platforms maintain ties to the Democratic Party. Kalshi employs Stephanie Cutter, a former Obama staffer, as a senior policy adviser. Polymarket hired Rob Eskridge, a former chief of staff to a Democratic congressman, in September to lead government relations. A Polymarket spokesperson said the company welcomes scrutiny, while Kalshi said it supports frameworks regarding insider trading and consumer protection.

Sean Patrick Maloney, a former congressman who leads the Coalition for Prediction Markets, cautioned his party against excessive regulation. Speaking at a New York conference this month, Maloney warned that pushing the industry offshore would move activity to platforms with weaker protections against manipulation.

The Commodity Futures Trading Commission also faces potential pressure from a Democratic-led Congress. In July, the Government Accountability Office accepted a request from Sen. Elizabeth Warren to review the agency's workforce reductions from 2025. Warren is expected to chair the Senate Banking Committee if Democrats win that chamber. CFTC spokesperson Zach Fulton rejected the criticism of the agency's capacity, noting that it regulates nearly $600 trillion in notional value and is on track to hire about 100 employees in critical areas by the end of 2026.

The agency has recently sought public comment on vertical integration within its exchanges and warned exchanges about manipulation risks in mention markets. It continues to approve new products and defends the platforms against state arguments that their sports offerings amount to gambling. David Aron, a former CFTC employee, said committees in a Democratic-led chamber would be a little sharper, adding that the process will not be fun.