The US senators introduced the new legislation this week to prohibit Commodity Futures Trading Commission (CFTC)-registered entities from listing any prediction contract that resembles a sports bet or casino-style game.

In an interview with CNBC, senator Schiff said: “I asked CFTC chairman Michael Selig if he has a position on whether these contracts were gambling or sports betting? He said he didn’t, and that he was going to leave it to the courts. But we’re seeing something very different with him actively intervening to support these prediction markets, notwithstanding that they’re really indistinguishable from sports betting.”

“We don’t allow sports betting in California. It ought to be up to the states to decide what kind of gambling goes on within their state. This kind of end run around the law is encouraging vast amounts of gambling. We saw $1 billion (£0.75 billion) of trading in prediction contracts just over the Super Bowl alone. That’s something that ought to be decided state by state and not decided for them by this industry,” he explained.

Speaking on companies taking steps to crack down on insider trading in these markets, the California Senator said: “I don’t think it’s enough because it’s one thing to say this is our policy, it’s another actually to put into place the steps to make sure it’s not happening on those platforms.”

“You can say athletes can’t bet on themselves, but if an athlete does, how will it be caught? What if an athlete’s family member does? What if a government official’s colleagues or family or staff bets on insider information? It’s got to be more than an aspirational statement by these companies.”

Two major prediction market players Kalshi and Polymarket this week said they have taken steps to address insider trading, on the back of mounting pressure from industry experts and senators to thwart market manipulation.

Meanwhile, Republican senator for Utah, John Curtis, said in the CNBC interview that there’s a lot of momentum on both sides of the Congress to pass their legislation. “And I think you’re going to see further legislation not only from us, but from our colleagues on this, to get our arms around it and make sure it’s done properly.”

“There’s a lot of bipartisan interest and concern over this that makes this one of those rare opportunities for the parties to get together and do something meaningful. I’m optimistic. It shouldn’t really be left to litigation. Frankly, I think the law already makes this clear. But the CFTC chairman is moving in a completely different direction of essentially unlicensed, unregulated activity here. So, the Congress will need to step in,” Schiff added.

The CFTC in March signed a memorandum of understanding with Major League Baseball, marking the first formal agreement between the US derivatives regulator and a professional sports league.

The US futures and swaps watchdog on Tuesday created a new Innovation Task Force to support the development of regulatory frameworks for new technologies in US derivatives markets.