The BETS OFF Act Explained: What Congress's New Prediction Market Bill Actually Does
Congress introduced the BETS OFF Act on March 17, 2026. Here's what it actually bans, what it doesn't, and what it means for Kalshi and Polymarket traders.
Published: March 19, 2026 | Category: Regulation | Read time: 8 min
Introduction
Two days ago, Congress dropped its most sweeping attempt yet to rein in prediction markets — and if you have money on Kalshi or Polymarket right now, you need to understand what it actually says. Not the headline. Not the hot take. The actual text.
On March 17, 2026, Senator Chris Murphy (D-CT) and Representative Greg Casar (D-TX) introduced the Banning Event Trading on Sensitive Operations and Federal Functions (BETS OFF) Act. It is not a bill to ban prediction markets. It is a bill to ban specific categories of contracts — and the scope of those categories is wider than most coverage is letting on.
Here's what it says, what it doesn't say, who's behind it, what the odds of passage are, and what it means for your portfolio.
What Triggered the BETS OFF Act
The immediate catalyst was one of the more eyebrow-raising episodes in prediction market history.
In the hours before U.S.-Israeli air strikes on Iran, a flurry of new accounts appeared on Polymarket and placed large bets predicting the strikes would happen. Many of those accounts had been created the same day they traded. Two events in particular drew Congressional attention. On Kalshi, a trader named "Magamyman" reportedly walked away with $553,000 on Kalshi's "Will Khamenei be out by EOY?" contract — a market on the fate of Iran's Supreme Leader Ali Khamenei. Kalshi ultimately invoked a death-carveout clause and resolved the contract at last-traded price rather than $1 when Khamenei died in the strikes. Separately, on Polymarket, investigators identified $1.2 million in suspicious trades across six wallets predicting U.S. strikes on Iran — trades placed in the hours before the strikes occurred, many from accounts created the same day (source). The two events were distinct: the Magamyman/$553K trade was on Kalshi's Khamenei leadership contract; the $1.2M insider trading allegation was on Polymarket's "US strikes Iran" contract.
Senator Murphy said flat out: "I'm confident that people in the White House or those close to officials who knew about military plans cashed in." The White House denied it.
A second suspicious episode: bets predicting the extraction of Venezuelan President Nicolás Maduro were placed on Polymarket shortly before that operation became public knowledge.
Whether or not insider trading actually occurred, the optics were terrible — and in Washington, optics are often enough.
What the BETS OFF Act Would Actually Ban
The bill targets four main categories of event contracts:
- Government actions — Any non-financial decision by a government body or official. Think: cabinet appointments, executive orders, military strikes, pardons.
- War and military operations — Contracts where the underlying event is an armed conflict or military action.
- Terrorism and assassination — Contracts on acts of political violence or targeted killings.
- Events where one person knows or controls the outcome — The broadest and most controversial clause. Murphy explicitly cited: Super Bowl halftime show contracts (producers know the performers), Academy Awards contracts (voters know their ballots), and even "what word will this politician say in their speech" markets (speechwriters know).
The bill also targets offshore platforms by amending existing illegal gambling statutes to block payment processing to non-CFTC-regulated platforms offering these contracts. Promoters, managers, or owners of such businesses operating domestically could face criminal penalties.
What it explicitly does NOT ban:
Murphy included a carveout for contracts where the "underlying characteristic is financial, commercial, or economic in nature." This means Federal Reserve interest rate contracts, GDP contracts, inflation markers, and similar macro-financial markets would remain legal under this bill.
That's a crucial distinction. Your "Fed cuts in 2026" position on Kalshi (current price: 32¢) is not targeted. The Khamenei "out by EOY" contract? That's exactly what Murphy had in mind.
How the BETS OFF Act Fits Into a Larger Legislative Wave
This is the fourth major piece of congressional legislation targeting prediction markets in less than three months. Here's the full map:
| Bill | Sponsors | Target |
|---|---|---|
| Merkley-Klobuchar Act | Sen. Merkley (D-OR), Sen. Klobuchar (D-MN) | Bans Congress, president, VP from trading event contracts; fines starting at $10K (CNBC, Mar 5) |
| DEATH BETS Act | Sen. Schiff (D-CA), Rep. Levin (D-CA) | Explicitly bans CFTC-regulated platforms from listing contracts on terrorism, assassination, war, or individual death |
| Prediction Markets Security and Integrity Act | Sen. Blumenthal (D-CT), Sen. Kim (D-NJ) | Bans insider trading on event contracts, restricts sports betting on CFTC platforms, returns some oversight to states |
| BETS OFF Act | Sen. Murphy (D-CT), Rep. Casar (D-TX) | Broadest scope: bans war/terror/assassination AND non-financial government actions AND any market where outcome is controlled/known by one party |
The BETS OFF Act is co-sponsored by Sen. John Hickenlooper (D-CO), Rep. Yassamin Ansari (D-AZ), Rep. Gabe Amo (D-RI), and Rep. Rashida Tlaib (D-MI), per the Senate press release.
The bill is also backed by endorsements from seven organizations: VoteVets, Americans for Financial Reform, Public Citizen, Win Without War, American Economic Liberties Project, Groundwork Collaborative, and Center for International Policy Advocacy — suggesting this is a coordinated push, not a lone-wolf bill.
What CFTC Is Already Doing (And Why It Matters)
Congress doesn't operate in a vacuum here. The CFTC under Chairman Michael Selig has been actively building a regulatory framework for prediction markets, including a 40-question rulemaking release in March 2026 — and Selig has publicly staked his tenure on treating prediction markets as a legitimate "innovation" deserving federal oversight rather than a ban.
That creates a fundamental tension: the CFTC is the federal agency that regulates Kalshi and Polymarket (via QCX LLC). Under existing law, the Commodity Exchange Act already prohibits war and terrorism contracts on CFTC-registered platforms. But Polymarket continued to offer those markets — because its exchange infrastructure largely operates internationally and allows anonymous participation via crypto, sidestepping direct CFTC enforcement.
The BETS OFF Act's strategy around this gap is clever: rather than trying to reach offshore platforms directly, it attacks the payment rails — cutting off U.S. financial institutions from processing transactions for illegal overseas platforms. That's the same playbook the DOJ used against offshore poker sites in 2011.
Sources: Reuters, Mar 17, 2026; CT Mirror, Mar 17, 2026
The Platform Stakes: Who Gets Hurt Most
Not all platforms are equally exposed. Here's the honest breakdown:
Polymarket has the most to lose. Its highest-volume markets are precisely the categories the BETS OFF Act targets: war, geopolitical upheaval, leadership transitions, and assassination-adjacent markets. By Reuters reporting, its macro/political book represents the lion's share of its trading volume. If this bill passed, Polymarket would need to delist its most trafficked contracts, and its payment rail strategy — currently crypto-based to avoid U.S. banking oversight — would face new legal risk.
Kalshi is better positioned but not immune. Kalshi is CFTC-regulated, requires user identification, and already voided its Khamenei "out" contract by invoking a "death carveout" in its rules when the ayatollah was killed in the strikes. The Fed rate contracts, inflation contracts, and economic markets that make up a significant share of Kalshi's volume fall explicitly within the bill's financial/economic carveout. However, Kalshi's political and geopolitical book (government action contracts) would be targeted.
Robinhood, Coinbase, PrizePicks, and other Kalshi-powered platforms would inherit Kalshi's constraints — their inventory is drawn entirely from Kalshi's contract slate.
FanDuel Predicts, DraftKings Predictions (both CME Group-powered): primarily sports-focused, lower direct exposure.
Does the BETS OFF Act Actually Have a Chance of Passing?
Here's where we have to be honest about the political math.
Democrats introduced this bill. Republicans control both chambers. The path to passage is narrow.
Murphy and Casar have said publicly they hope to attract Republican co-sponsors, citing Data for Progress polling showing 57% of Republicans support banning wagers on potential government actions. That's not nothing. War-profiteering optics are bad for everyone.
But there's a real countervailing force: the Trump administration has been broadly supportive of prediction markets. CFTC Chair Selig is a Trump appointee who has actively championed the industry. The White House denied any insider trading occurred. Getting Republicans to sign onto a bill that implicitly indicts their own party's proximity to suspicious trades is a tough sell.
Reuters described the path to law as "uncertain." Reuters noted it is "the fourth major piece of legislation" targeting the industry — and none of the previous three have advanced to a vote.
The more likely short-term outcome: the bill applies pressure on the CFTC's ongoing rulemaking process. It signals political appetite for restrictions, which may push Selig's framework to include harder guardrails on political and government-action markets even without legislation passing.
Sources: Reuters
What This Means for Traders Right Now
Contracts on economic/financial outcomes (Fed rates, inflation, GDP, unemployment) are explicitly protected under the bill's financial carveout. These positions are not at regulatory risk from the BETS OFF Act specifically.
Contracts on government actions, war, or political leadership carry elevated regulatory risk in this environment. Even if this specific bill fails, the pattern is clear: Congress is paying attention, multiple bills are targeting this category, and the CFTC is in active rulemaking. Position sizing accordingly.
The Khamenei contract situation is a preview. Kalshi voided its Khamenei contract on its own internal death-carveout rule — not because legislation forced it. Platforms are already self-policing under political pressure. That pattern will continue regardless of whether the BETS OFF Act advances.
Offshore access via VPN is getting riskier. The payment-rail enforcement mechanism in this bill specifically targets the infrastructure people use to access Polymarket's international markets from the U.S. Even if the bill doesn't pass, the enforcement framework being built around this issue will tighten.
The Broader Picture: Is This a War on Prediction Markets?
It's more accurate to call it a war on specific categories of prediction markets. Murphy himself said: "There will still be an infinite number of places where people can make bets."
The industry's defenders argue that prediction markets serve genuine public goods — aggregating dispersed information into price signals that are more accurate than expert forecasts. Kalshi and others have staked their legal standing on being regulated derivatives exchanges, not casinos. That argument has prevailed in court (Kalshi won its suit against the CFTC over congressional control contracts (filed November 2023, won at district court September 2024)).
What's changed is the scale. Prediction market volumes have exploded in 2025-2026. When a single anonymous trader makes $553,000 on a war bet placed the day before the war started, the "wisdom of crowds" framing gets harder to sustain politically.
The BETS OFF Act isn't the end of prediction markets. But it is a real signal that the growth-without-guardrails era is coming to an end.
Frequently Asked Questions
Q: Does the BETS OFF Act ban Kalshi or Polymarket? No. It would ban specific contracts on those platforms — government actions, war, assassination, and markets where one party knows or controls the outcome. Economic and financial contracts would be unaffected.
Q: Are my current Fed rate contracts safe? Under this specific bill, yes. Murphy explicitly carved out contracts where the "underlying characteristic is financial, commercial, or economic." Interest rate, inflation, and GDP markets are not targeted.
Q: What happens if the bill passes to markets already open? The bill text doesn't specify transition rules for existing positions. Historically, CFTC rule changes have included wind-down periods for existing contracts. The Khamenei situation (where Kalshi simply voided the contract and paid out pre-event prices) is a possible model — which is not great for traders holding long positions.
Q: Would this affect sports prediction markets? Not directly — this bill doesn't target sports. The DEATH BETS Act and Prediction Markets Security and Integrity Act deal more explicitly with sports and non-financial government action contracts. Murphy noted his bill "doesn't cover the waterfront."
Q: When would this take effect? The bill was introduced March 17, 2026. It has not been scheduled for committee hearings. Republican leadership controls the legislative calendar. No vote is imminent.
Bottom Line
The BETS OFF Act is the broadest congressional challenge to prediction market contracts to date. It targets war, terrorism, assassination, government actions, and any market where one party controls or knows the outcome — while explicitly exempting financial and economic contracts. It's a Democrat-led bill in a Republican-controlled Congress, meaning passage is uncertain. But it is part of a coordinated wave of legislation and CFTC rulemaking that signals the end of the "anything goes" era for political and geopolitical prediction markets.
If you trade on Kalshi or Polymarket, the question isn't whether to panic — it's whether your position book is concentrated in the categories that are now in political crosshairs.
For up-to-date prices on the markets discussed in this article, explore predictionmarkets.us for live data across platforms.
Sources: Murphy Senate press release | Reuters | CT Mirror | NPR | CNBC