Kalshi and Polymarket vie for Washington influence as Congress contemplates regulation

A Kalshi advertisement seen in Washington D.C. on March 27, 2026.Paul Lester | CNBC

Sports are the most popular event contract type by volume -- as of February, almost 90% of bets made on Kalshi in the last year were on sports, according to the Congressional Research Service -- though users in some cases are able to place bets on more controversial issues, which has led to increased scrutiny.

One user on Polymarket raked in $400,000 in January by correctly predicting the ouster of Venezuelan President Nicolás Maduro, raising insider trading concerns. Subsequent bets placed on the Iran war and other government actions have heightened the alarm of lawmakers, who are scrambling to legislate tougher restrictions on the platforms.

"By offering bets on wars, elections, and U.S. government actions, prediction markets are a real danger to our democracy and ripe for exploitation by public officials with insider information," Sen. Jeff Merkley, D-Ore., said in a statement to CNBC. Merkley has introduced multiple bills seeking to more strictly regulate prediction markets.

Prediction markets are quickly finding opponents. Casinos and sportsbooks argue they operate as unlicensed sites for gambling. And several states have issued cease and desist orders to halt their operation. Kalshi won a key case last week when a federal appeals court slapped down an attempt by New Jersey to curb the platform.

In Washington, lawmakers are just waking up to how the industry works.

Kalshi spent $615,000 and Polymarket spent $360,000 on lobbying in 2025, according to OpenSecrets, an organization that tracks U.S. political spending. That pales in comparison with the double-digit millions spent by top trade associations. Kalshi opened a Washington office in January and tapped Biden administration alum John Bivona as its first head of government relations. In April, Kalshi added Stephanie Cutter, a former top aide to Democrats including President Barack Obama, as policy advisor.

Kalshi is regulated by the Commodity Futures Trading Commission and does not allow users to place bets anonymously, a contentious feature of some platforms that operate outside the U.S. Kalshi has a robust surveillance and enforcement team, Diana said, and made news earlier this year when the company suspended and referred to federal officials an editor for the YouTube influencer Mr. Beast who allegedly engaged in insider trading.

As insider trading concerns on the platforms heightened last month, Kalshi announced voluntary guardrails to protect against illegal activity. The same day, Polymarket announced it was tightening its own rules against insider trading.

Kalshi has not been without controversy. The company allowed bets in late February on whether the late Iranian Supreme Leader Ali Khamenei would be out of power. Khamenei was killed on the first day of the U.S.-Israeli war with Iran, and bettors were left expecting a payout.

Kalshi ended up refunding bettors all fees and net losses related to those bets, citing federal regulations that bar wagers on death.

The CFTC regulates prediction markets as "designated contract markets" offering event contracts under the Commodity Exchange Act. The CFTC treats the contracts the companies offer as "swaps," a type of financial exchange it regulates.

"These are derivatives markets, and they come with a comprehensive set of regulations and protections for the integrity of the markets and the safety of the consumer," said Sean Patrick Maloney, a former U.S. House Democrat from New York who runs the new lobbying group the Coalition for Prediction Markets, which includes Kalshi.

Other coalition members include crypto.com, Coinbase, Robinhood and Underdog -- all entities based in the U.S. and regulated by the CFTC. It does not represent Polymarket.

Blockchain-based Polymarket is headquartered in New York and run by an entity licensed in Panama. Its limited U.S. platform is regulated by the CFTC, but its international side is not overseen by American regulators.

Lawmakers' concerns rest largely on companies such as Polymarket that operate outside the U.S. and technically bar U.S. users, some of whom find their way in through work-arounds such as virtual private networks, or VPNs, which can be used to hide their locations.

Asked about these concerns, Polymarket's Chalos touted what she said was the company's internal abilities to identify bad actors.

"I think there's a bit of a misconception around this idea of anonymous trading. Blockchains afford the ability to gather an enormous amount of information about a person's trading activity. In many instances, individuals are able to be identified," Chalos said, though she would not comment on whether anyone was identified for bets placed related to Máduro or the Iran war.

While Polymarket has generally been less public-facing than Kalshi, it has started developing a ground game in the nation's capital.

It unveiled a pop-up bar in downtown Washington in March, where revelers could access Bloomberg terminals and place bets alongside libations, though power issues led to a botched opening.

"We have a number of key hires in the pipeline, which will broaden our D.C. presence," Chalos said. "We have third-party people we work with down in D.C., and then members of the company have been spending time down there as well."

These efforts to win hearts and minds have left Congress somewhat split.

"Sometimes it can seem like Washington is the last place to wake up to something millions of Americans have embraced and enjoy, and it feels like there's a lot for people to do," Maloney said.

Congressional leadership has been mostly quiet on the issue. Senate Majority Leader John Thune, R-S.D., and House Speaker Mike Johnson, R-La., did not respond to requests for comment for this story.

House Minority Leader Hakeem Jeffries, D-N.Y., offered tepid support for congressional oversight of the industry during a press conference in March.

"I do think it's reasonable for us to take a look at what can be done in this space and try to find a bipartisan path forward, working with all of the stakeholders in this area," Jeffries said.