During the last federal hearing on sports betting, which took place several weeks ago, the focus was primarily on political trading, particularly concerning the 2024 US presidential election. At that time, Kalshi was processing over $175 million in trades related to Donald Trump's chances against Kamala Harris. However, the landscape for trading in sports derivatives has undergone a substantial shift since then, with Kalshi's valuation soaring to $22 billion. This week, conflicting views emerged regarding federal regulations on sports betting during a heated hearing on Capitol Hill.
Similar to the previous hearing in December 2024, the latest meeting concluded without clear indications on whether Congress will enact legislation to regulate the multibillion-dollar industry. Ongoing scandals within various sports leagues and allegations of insider trading in prediction markets have intensified scrutiny on Congress’ role in preventing fraud and misconduct. Senator Marsha Blackburn, who chairs the Senate Commerce Subcommittee on Consumer Protection, Technology, and Data Privacy, led the hearing entitled "No Sure Bets: Protecting Sports Integrity in America."
High-profile scandals continue to proliferate across different sports. Recently, a former NBA assistant coach admitted to leaking inside information about a player’s injury to a group of bettors, who profited from this tip. Two MLB pitchers are facing trial on charges of pitch-rigging, and the main defendant in a college basketball point-shaving scandal is set to be sentenced next month.
“When Americans watch their favourite sports team, they don’t want to worry about the game being rigged,” Blackburn remarked in her opening statements. “They don’t want to worry that their favourite player missed a free throw to make an extra buck on the side.”
Ahead of the hearing, Deutsche Bank predicted that US betting for the upcoming World Cup could exceed $4 billion, marking the first time in 32 years that the US partially hosts this monumental event from June 11 to July 19. In past hearings, Blackburn highlighted research indicating that about 10% of organized crime revenue from global sources stems from illegal sports betting.
She also cited findings from the United Nations Office on Drugs and Crime, which estimates that at least $140 billion is laundered every year through illegal betting operations. She previously questioned the Justice Department regarding any links between match-fixing and international organized crime.
As for scandals, former NBA guard Damon Jones recently pleaded guilty to his involvement in rigged poker games supported by La Cosa Nostra members. He also admitted to sharing inside information on a particular injured NBA player, consistent with the profile of LeBron James.
In response, FIFA has taken significant steps to address integrity threats ahead of the World Cup, conducting a summit with its integrity task force dedicated to mitigating risks associated with match manipulation. This task force includes cooperation with prominent law enforcement agencies, such as the FBI and Interpol.
The upcoming World Cup may provide a crucial test for the FBI in safeguarding against organized crime during the 2028 Summer Olympics in Los Angeles. Blackburn stated, "Hearings like today establish a baseline that will help us ensure that the FBI is monitoring these situations."
While aiming to restore integrity in sports, the hearing shifted into a debate around prediction markets. Industry insiders anticipated a confrontational exchange, particularly for Patrick McHenry, senior advisor for the Coalition for Prediction Markets, who faced scrutiny regarding consumer protections on those platforms.
Colorado Senator John Hickenlooper illustrated a troubling instance involving a 15-year-old influencer promoting a prediction market on social media. McHenry claimed he was unaware but was open to discussing safeguards for minors. Blackburn questioned both McHenry and American Gaming Association President Bill Miller about their advertising targets, to which they both affirmed that their organizations do not target minors.
The hearing also featured testimonies from Mary Beth Thomas of the Tennessee Sports Wagering Council, Scott Sadin of IC360, and Harry Levant, an expert in gambling addiction. New Mexico Senator Benny Ray Lujan asked witnesses how Congress should regulate sports event contracts. Miller suggested that Congress confirm state and tribal rights, a viewpoint echoed by Thomas.
In contrast, McHenry expressed willingness to collaborate with legislators should Congress assert its authority, emphasizing that sports derivatives regulation falls under the US Commodity Futures Trading Commission's jurisdiction, citing a recent Third Circuit Court of Appeals decision.
When asked about potential collaboration between Congress and sports leagues to address integrity concerns, Hickenlooper expressed that it was a challenging question worth further exploration. Texas Senator Ted Cruz, chairing the broader Senate Committee on Commerce, Science and Transportation, elaborated on the severity of betting scandals impacting Major League Soccer and the UFC. Cruz will partner with Washington Senator Maria Cantwell to initiate a bipartisan review of how leagues, sportsbooks, and stakeholders uphold sports integrity.
The prospects of proactive measures to rebuild trust among fans could be welcomed by integrity watchdogs. A key takeaway from the hearing was the potential for leagues to actively partner with Congress to enhance integrity monitoring. One suggestion includes finalizing a Memorandum of Understanding similar to the one recently achieved between Major League Baseball and the CFTC, with the Commission also announcing a separate MOU with the NHL.
Despite the practicality of such partnerships, the complexity of discussions between Congress and leagues over an MOU remains a concern. Nevertheless, experts have explored various strategies to boost the detection and enforcement of match-fixing practices. Matt Bakowicz, director of the Sports Business Management track at American University’s Kogod School of Business, highlighted the need for a federal sports integrity baseline, which might incorporate mandatory suspicious wager reporting, standardized information sharing, independent integrity monitoring, privacy-protected data sharing, and consistent regulations for high-risk markets.
“Congress can play a helpful role, but the focus should be on coordination and enforceable minimum standards rather than a blanket federal approach to sports betting policy,” Bakowicz stated.
On the other side of Capitol Hill, House members monitored the hearing closely. New York Representative Paul Tonko has proposed a federal regulatory framework for sports wagering, expressing hope that the Senate hearing would catalyze action. “Anyone who cares about the integrity of sports should support federal protections to rein in this out-of-control industry. I’m heartened that the Senate is holding this hearing,” Tonko stated, optimistic that a House hearing on sports wagering is forthcoming.
Though Blackburn did not guarantee that a federal sports wagering bill will pass by 2030, she acknowledged the urgency of Congress's exploration into the topic, citing interest among her peers to progress forward on the issue.
