Merkley-Warren Bill Targets Prediction Markets: California Implications
Senators Merkley and Warren introduced legislation to bring event contracts under tighter rules. Here's what California traders need to know.
- What the Bill Actually Says
- Why It Probably Won't Pass — But Could
- Concrete Risk Levels for California Markets
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What the Bill Actually Says
On March 26, 2026, Senators Jeff Merkley (D-OR) and Elizabeth Warren (D-MA), joined by Representative Jamie Raskin (D-MD), introduced legislation that would prohibit CFTC-regulated event contracts on (1) sporting events, (2) elections, (3) war and military operations, and (4) actions of sitting government officials. The bill specifically names Kalshi and treats their product category as gambling rather than as commodity derivatives.
If passed in its current form, it would force Kalshi to delist their entire sports book and most of their political markets. Macroeconomic contracts (CPI, Fed rates, jobs), crypto, weather, wildfires, and entertainment would not be affected. The bill follows a separate Merkley proposal from earlier in March that would bar sitting elected officials from trading on prediction markets.
Why It Probably Won't Pass — But Could
The bill faces serious headwinds. The CFTC, under its current chairman, has explicitly defended event contracts as legitimate financial instruments. Kalshi have well-funded legal teams (Kalshi already won a major federal case against the CFTC's prior leadership in 2024). The Coalition for Prediction Markets is lobbying actively, and the broader fintech industry views this category as strategic. With a divided Congress and no clear Republican co-sponsors, the realistic path to passage is narrow.
That said, the bill is a meaningful signal. Even if it dies in committee, the political pressure has already prompted Kalshi to pull controversial 'Iran rescue' markets in early April after backlash. Operators are quietly scrubbing edge-case contracts to reduce regulatory risk. The Overton window has moved.
Concrete Risk Levels for California Markets
| Market category | Risk if bill passes | California impact |
|---|---|---|
| Sports (Clippers, Lakers, Dodgers, etc.) | High — would be delisted | Major — biggest CA volume category |
| California governor & senate races | High — would be delisted | Major — losing 2026 election alpha |
| Wildfire landfalls | Low — not covered by bill | None |
| Fed rates / CPI / jobs | Low — not covered | None |
| Crypto contracts | Low — not covered | None |
| Cultural & entertainment | Low — not covered | None |
What California Traders Should Do Right Now
- 1.Don't panic-close positions. The bill has not advanced past introduction.
- 2.Diversify across Kalshi so you're not exposed to a single operator's response.
- 3.Watch for committee markup as the leading indicator. If the bill moves to markup, the risk picture changes.
- 4.Build your information edge in non-sports, non-election categories (wildfires, CA economic indicators, CA-relevant cultural markets) — those are unaffected regardless of the outcome.
- 5.Subscribe to Coalition for Prediction Markets updates and the Next Event Horizon newsletter for primary-source coverage.
The Bigger Picture
Every nascent financial market has gone through this cycle: rapid growth, regulatory backlash, eventual coexistence. Crypto did it. DFS did it. Prediction markets are doing it now. The most likely 2026 outcome is the status quo holding through the year, with operators making small voluntary concessions to defuse pressure. California traders are in a structurally good position because the state has shown zero appetite to challenge federal CFTC jurisdiction.
Last reviewed by Catie Di Stefano on August 5, 2026. We re-verify market prices, polling, and citations on every update.
Frequently Asked Questions
Related guides
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Sources & references
- 1.Commodity Futures Trading Commission — Event Contracts — CFTC.gov
- 2.Kalshi wins court battle to offer election contracts — Reuters
- 3.Polymarket and the rise of prediction markets — Associated Press
- 4.Kalshi & prediction-markets coverage — Bloomberg
External links open in a new tab. We cite primary regulatory and major news sources where possible. Citations to trusted regulators (CFTC, SEC, IRS, NOAA, .gov, .edu) are dofollow; commercial outbound links are not endorsements.
Catie Di Stefano has spent 15 years working with online gambling across some of the most regulated and competitive gambling markets in the world.
Starting at Betsson Group in Malta in 2011, she has in recent years worked her way through VIP management, CRM, gamification and marketing leadership across European and North American operations. Catie was a licensed consultancy for Hard Rock Casino in New Jersey, where she held a DGE vendor license and owned the execution of the online CRM program from launch day in 2018.