WATCH: Sens. Schiff, Curtis Highlight New Bipartisan Bill to Ban Sports Prediction Market Contracts on CNBC’s Squawk Box

The Prediction Markets Are Gambling Act is the first bipartisan bill introduced in the Senate seeking to regulate prediction markets

Washington, D.C. - U.S. Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah) appeared on CNBC's Squawk Box to highlight the new Prediction Markets Are Gambling Act, legislation they introduced 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.

During the interview, the Senators reiterated that the authority to regulate gambling and sports betting lies with the states and emphasized their legislation as proof that there is momentum on both sides of the aisle in Congress to regulate this industry.

View the full interview here.

Key Excerpts:

On CFTC Chair Michael S. Selig greenlighting these markets:

Schiff: […] I asked the chairman about this during his confirmation hearings, did he have a position on whether these contracts were gambling or sports betting? He said he didn't, that he was a tabula rasa, 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. And in California, we don't allow sports betting. 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 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.

On concerns about revenue for states and insider trading in these markets:

Schiff: […] In addition to the concern about revenue to the state, when it is completely unregulated like this, you could have, you know, vast amounts of insider trading, people who have particular insights, either because they're government officials or because they're the athletes themselves who can end up influencing the events they're betting on. We've seen reports, for example, recently that someone with 93% accuracy has been predicting what's been going on in the Iran war. That's heavily suggestive of insider trading, and when it could be done using blockchain, there's no way to really regulate that. At least, it's not being regulated today. And we want to make sure that there is regulation of this.

Curtis: […] You have to ask what could go wrong. Imagine betting on a high school athlete getting hurt the day of a high school game, right? Like that's what that's why this needs the appropriate regulation. You could see how wrong that could go.

On companies taking steps to crack down on insider trading in these markets:

Schiff: 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.

On building support in the Congress to pass their legislation:

Curtis: Well, this might be a good opportunity to use the prediction markets to bet on that. I actually think both of us feel that there's a lot of momentum on both sides of the aisle on this. 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.

Schiff: […] 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. So 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.

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