WATCH: Hickenlooper Hammers Prediction Markets on Insider Trading, Corruption in Senate Hearing

Ranking Member Hickenlooper: "There are clear risks to our national security when there's inside information being leaked out. This shouldn't be happening."

Hickenlooper has demanded the CFTC rein in prediction markets as they circumvent state laws

WASHINGTON - Today, U.S. Senator John Hickenlooper, Ranking Member of the Senate Commerce Committee's Subcommittee on Consumer Protection, Product Safety and Data Security, grilled witnesses representing prediction markets like Polymarket and Kalshi on the lack of Commodity Futures Trading Commission (CFTC) oversight, their attempts to bypass state regulations on gambling, and the potential risks unregulated prediction markets pose to minors and individuals struggling with gambling addiction.

"We've got to get this right. 24/7 access to online sports betting has increased these risks to consumers, and in a manner that I think far outweighs the traditional brick and mortar gambling facilities," said Ranking Member Hickenlooper in the hearing. "But to let the hounds of hell, the incredible power of mass marketing and social media, to let that untethered prey on our young people, I think, is unconscionable, and I think it's irresponsible."

Watch Ranking Member Hickenlooper's opening remarks in full here.

During today's hearing, Ranking Member Hickenlooper grilled former U.S. Representative Patrick McHenry, a witness representing The Coalition for Prediction Markets, on misleading partnerships with social media influencers and the failure of prediction markets like Kalshi and Polymarket to set smart policies.

"Why isn't Kalshi out in front and picking out these issues and saying: 'all right, we're going to deal with this, and here's how [we're going to do it.]' We shouldn't have to go through hearings and slow it down. Every day that they can stall, they're going to make more money," Ranking Member Hickenlooper told McHenry.

Watch Ranking Member Hickenlooper's fiery exchange with McHenry here

In addition, Ranking Member Hickenlooper questioned witnesses on the CFTC's failure to regulate prediction markets. Online prediction market platforms like Kalshi and Polymarket function like online casinos, allowing users to wager directly on real events such as sports, elections, corporate earnings, economic data, award shows, and more in a user-friendly setting under the guise of financial trading language. States like Colorado have set commonsense regulations on sportsbooks and gambling entities to protect youth and consumers. However, prediction markets fall under CFTC's purview, allowing prediction markets to circumvent state regulations.

"The CFTC has literally no experience in regulating sports betting. Even worse, CFTC has failed to use the authority it does have to protect sports betters from insider trading, market manipulation, predatory advertising, and financial instability. This workaround is merely a way for prediction markets to skirt state consumer protection laws," said Ranking Member Hickenlooper in the hearing.

Ranking Member Hickenlooper also shared personal experiences with the effects of gambling and highlighted the risks of unregulated prediction markets to young people and individuals struggling with gambling addiction.

"I think prediction markets fail to protect young people who are particularly vulnerable to gambling addiction. We have a lot of young men, especially, that are vulnerable to this, and we're doing nothing," said Ranking Member Hickenlooper during the hearing. "Gambling addiction is at the additional risk of being a silent illness. Unlike alcohol and drug addiction, the financial and psychological harms that come with gambling addiction are hard to see."

In March, Ranking Member Hickenlooper introduced the Banning Event Trading on Sensitive Operations and Federal Functions (BETS OFF) Act, bicameral legislation to ban wagering on government actions, terrorism, war, assassination, and events where an individual knows or controls the outcome.

This week, Ranking Member Hickenlooper sent a letter to the CFTC to prohibit prediction markets from allowing margin trading in connection with event contracts, particularly for retail lending. In March, Hickenlooper and Reed called on the CFTC to prohibit gambling contracts on events tied to U.S. military operations after reports of users on Polymarket profiting off the timing of U.S. strikes in Iran and the death of Iranian Ayatollah, Ali Khamenei. Hickenlooper previously demanded the Trump administration provide a plan to combat manipulation and fraud in prediction markets. During today's hearing, Ranking Member Hickenlooper highlighted the risks that allowing these bets on government actions pose to our national security. He also posted a video on his social media platforms in advance of today's hearing to draw awareness to the harms of unregulated prediction markets.

Full transcript of Ranking Member Hickenlooper's opening remarks below:

"Thank you, Madam Chair [Blackburn].

"It's been a pleasure working with you on this issue and others, and looking at the, as you describe it, the inappropriate regulated betting markets, specifically and particularly the recent explosion of prediction markets pose every day.

"I come at this from a different point of view, but I share your frustration.

"I don't talk about this all the time, but my father got sick when I was five years old, and died when I was eight.

"It was my mother's second husband, who passed away. So, I was the youngest of four kids, and I didn't do very well in those early years.

"And I was vulnerable in elementary school, but especially in middle school and high school, where I had real challenges, and I wasn't equipped to handle them. I wasn't ready.

"If I had been faced with this landscape - I was impulsive. I kind of was attracted, like many people, to gambling and to chance. I believe there was a beam of light coming down from heaven that was touching me.

"We've got to get this right. 24/7 access to online sports betting has increased these risks to consumers, and in a manner that I think far outweighs the traditional brick and mortar gambling facilities.

"This is especially true in the prediction markets. Sports betting makes up 40% of the trades on Polymarket and a staggering 90% on Kalshi.

"Online sports books, like Fanduel and Draft Kings, have started their own prediction markets to, in some way, bypass or negotiate state laws.

"Prediction markets have been in the headlines recently for permitting government officials with inside information to place bets on events relating to the death of Iranian leader Khomeini and the abduction of President Maduro.

"These are clear risks to our national security, when there's inside information being leaked out. This shouldn't be happening.

"We've introduced the BETS Off Act to ban wagering on government actions on war, terrorism, and assassinations by people with inside information.

"Similar inside trading issues exist in sports betting on prediction markets. Is there a bet on a specific player's actions? Are they going to miss that foul shot? Is that somehow going to be a way to make a quick 10 bucks on a wager?

"That's nuts.

"The very fact that we're betting on that, which is clearly should be a random outside event.

"The fact that so many people, especially young people, especially young men, are wagering this, there's got to be a real concern.

"Prediction markets claim that there are sports event contracts, which pose the same risk to consumers as online sports betting. They say that they're investments and not subject to state or tribal gambling laws.

"If they're not subject to those laws, then the regulator is the Commodity Futures Trading Commission. But the CFTC has literally no experience in regulating sports betting. Even worse, CFTC has failed to use the authority it does have to protect sports betters from insider trading, market manipulation, predatory advertising, and financial instability.

"This workaround is merely a way for prediction markets to skirt state consumer protection laws.

"I think prediction markets fail to protect young people who are particularly vulnerable to gambling addiction.

"We have a lot of young men, especially, that are vulnerable to this, and we're doing nothing.

"Gambling addiction is at the additional risk of being a silent illness. Unlike alcohol and drug addiction, the financial and psychological harms that come with gambling addiction are hard to see, and gamblers are unlikely, rarely share when they've lost. But, of course, when they've won, they're telling all their friends, so there's that sense that gets translated in our virulent social media that it's great, that it's positive, it's going to be a good thing.

"Many states, including my home state of Colorado, prohibit sports books from advertising to minors under 21, restrict advertising to those who are already struggling with gambling addiction.

"However, the CFTC does not currently apply the same protections to prediction markets. One study found that between 2018 and 2023 the amount of money that people spent on gambling, on sports gambling, rose, while their net investments fell nearly 14%.

"In other words, they don't have the money to invest because they're spending it on gambling. That's the inescapable reality of that.

"To really bring this home, I'll share that, you know, back in the days of my restaurant owner days, we had a bartender and a waiter, a wait staff member, and she and he fell in love.

"It was for the whole restaurant a wonderful moment. They were going to get married, and he decided he wanted a bigger down payment for the house they were going to buy together, with their money being commingled.

"Sure enough, he lost everything: their relationship, their love, their marriage, their future marriage was destroyed.

"When you see that firsthand, how an instant someone's life could be damaged, probably forever. You see the seriousness of this, and that's one story that I saw personally. This has been happening by the thousands, the hundreds of thousands.

"…But to let the hounds of hell, the incredible power of mass marketing and social media, to let that untethered prey on our young people, I think, is unconscionable, and I think it's irresponsible.

"I yield back to the chair."

###