Donald Trump Jr. invested in Polymarket recently through his venture capital firm. With growing national legislative efforts to regulate and outlaw prediction markets, this move has attracted widespread attention by surprise. Alongside his role as a strategic advisor for Kalshi, Trump Jr.’s involvement may complicate the ongoing discussions surrounding the “Prediction Markets are Gambling Act,” introduced by Senators Adam Schiff and John Curtis. This legislation would prevent prediction markets from making any sports-related contracts. This decision may be the most important factor in determining the long-term business viability of both Kalshi and Polymarket.
The atrociously misnamed “Prediction Markets are Gambling Act” is the far bigger danger to these platforms. A number of these states have already acted, preemptively passing laws to ban them. Utah is big and bold with its overall approach. These legislation additions came after Gov. Spencer Cox signed HB 221 earlier in March, which expands the state’s definition of gambling to include “prop bets.” This legal thicket has left both Kalshi and Polymarket with no choice but to cringe and change – taking their ball and going home to different states.
Polymarket had already begun moving to quell increasing fears of rampant insider trading and ethical conflicts. They’ve gone further with their ban than Kalshi has allowed betting. Both platforms have begun to take action to stop political candidates from cashing in through trading on their own campaigns. Kalshi implemented a strict policy in favor of regulatory compliance. Second, they will prevent anyone who is in, or enters into, a college or professional sports league from exchanging contracts on the collegiate or professional games in which they are participants.
Insider trading is obviously in a heightened state of scrutiny now. This follows reports that Polymarket users were able to profit from advance knowledge of U.S. military action in Iran and Venezuela before such operations were publicly announced. These events have escalated demands for tighter restrictions on prediction markets. Neal Kumar, Polymarket’s chief legal officer, addressed the situation, stating:
“These rule enhancements make our expectations abundantly clear for every participant across both platforms.” – Neal Kumar, Polymarket’s chief legal officer.
For all of this backlash, both platforms have continued to enjoy support from the Trump-controlled Commodity Futures Trading Commission. Their attempts to challenge bans in states like Nevada and Utah through legal action have met with limited success.
As the legislative landscape continues to change, where prediction markets go from here is unclear. Indeed, the proposed regulations would upend how platforms such as Kalshi or Polymarket operate. They could be doing immense harm, too, by restricting these platforms’ ability to innovate and grow.
