11 Senate Democrats ask Tim Scott for a Public Hearing on Prediction Markets

All 11 Democrats on the Senate Banking Committee wrote to Chairman Tim Scott on Sept. 23 asking him to hold a public hearing on prediction markets, escalating a fight over which regulator gets to write the rules for the sector.

For anyone trading event contracts on Polymarket, Kalshi or a broker app that has started offering these products, the underlying question is whether those bets get treated like sports wagers, commodities or securities, and that answer shapes the disclosures, leverage limits and anti-manipulation rules that apply. A public hearing would force that question into the open, on the record.

The closed-door meeting that triggered the letter

The letter came a day after committee Republicans met privately with Kalshi CEO Tarek Mansour at 10 a.m. on Sept. 23, according to The Block. That meeting, first reported by Punchbowl News on Sept. 18, was framed as a Republican-only roundtable on securities-based prediction markets. Tim Scott said in a statement to The Block that he brought the group together "to better understand the opportunities and challenges presented by securities-linked products." Kalshi did not immediately respond to The Block's request for comment.

Ranking member Elizabeth Warren of Massachusetts and Sen. Catherine Cortez Masto of Nevada led the Democratic letter. Nine other Democrats signed it: Jack Reed, Mark Warner, Chris Van Hollen, Tina Smith, Raphael Warnock, Andy Kim, Ruben Gallego, Lisa Blunt Rochester and Angela Alsobrooks.

Their request was direct. "In the interest of transparency, we ask you to hold a public committee hearing on this critical topic and allow all members of the Committee to participate," the letter said. Democrats asked the committee to examine the sector "on a bipartisan basis in a public hearing" rather than, as they put it, "behind closed doors in a Republican-only, industry-friendly roundtable."

Two regulators, two sets of rules

The turf fight matters because the two agencies that could end up in charge have different toolkits. The Senate Banking Committee oversees the SEC. The CFTC, which has claimed the lead role over prediction markets, answers to the House and Senate Agriculture committees.

Democrats zeroed in on contracts tied to corporate performance indicators. Those "could meet the definition of security-based swaps that would be subject to SEC regulation," the letter said. The committee has "a critical oversight role to play," the letter added, as industry participants request SEC approval for options tied to corporate earnings. A Banking hearing would give Democrats a venue to push the view that at least some prediction-market products belong in the SEC's lane, not the CFTC's.

The risks Democrats want on the record

The letter also pointed to the kinds of concerns a public airing would surface. It cited experts warning that prediction markets "are prone to encourage market manipulation and insider trading." It said early research shows profits are "highly concentrated in a small fraction of users, while the majority lose money." A day before the letter, CFTC staff warned exchanges that contracts settling on what a named person says or does "may be presumed susceptible to manipulation."

What happens next is unclear. No hearing date has been set. The CFTC has argued that contracts on its registered exchanges fall under exclusive federal jurisdiction, while several states are challenging Kalshi and others under gambling laws. The Senate has already moved once on the sector: on April 30 it unanimously barred senators and their staff from trading on prediction markets. Whether Banking Democrats can force a similar airing of the policy questions, against a chairman who has so far chosen closed-door industry sessions, is the test now in front of them.