What happened: the CLARITY Act prediction markets fight hits a wall
The short version: federal legislation that would have settled who regulates what in US crypto and event-contract markets has stalled, and Texas has started talking about prediction markets at the state level. That combination, reported in SBC Americas’ weekly prediction-markets round-up dated 18 September 2026, leaves the CLARITY Act prediction markets question exactly where it has been for months — unresolved, and being decided in courtrooms and state capitols instead of Congress.
Two moving parts are worth separating.
The first is federal. The Digital Asset Market Clarity Act, known as the CLARITY Act, cleared the US House of Representatives in 2025 with bipartisan support. Its core job is digital-asset market structure: drawing a cleaner line between what the Securities and Exchange Commission oversees and what falls to the Commodity Futures Trading Commission. Prediction markets got pulled into its orbit because the CFTC is also the agency that oversees event contracts under the Commodity Exchange Act. Any bill that reopens the CFTC’s rulebook becomes a natural vehicle for amendments on sports and election event contracts. The Senate has not moved it through, and reports this week describe the bill as having hit a brick wall rather than merely slowing down.
The second is Texas. Worth knowing the calendar: the Texas Legislature holds regular sessions only in odd-numbered years, so anything happening in 2026 is discussion, interim study and positioning, not lawmaking. Texas also has no legal sports betting, and expanding gambling there generally requires a constitutional amendment approved by voters. So “Texas starts talking” is meaningful as a signal about where the political argument is heading, not as an imminent legal change.
Why it matters
Because with Congress parked, the rules for prediction markets in the US are being written by litigation and by state regulators, one dispute at a time.
Here is the argument in plain terms. Platforms offering event contracts on sports outcomes, elections and economic data say they are federally regulated derivatives exchanges, supervised by the CFTC, and that federal law preempts state gambling statutes. Several state gaming regulators and tribal gaming interests say a contract on which team wins is a bet by any sensible reading, and that state licensing and consumer-protection law should apply. Multiple states have issued cease-and-desist notices; the platforms have gone to federal court; rulings so far have not all gone the same way, which is precisely why a legislative fix looked attractive.
A stalled bill has knock-on effects that go beyond one market:
- No single national standard. Whether you can trade a sports event contract in a given US state may depend on which circuit’s ruling applies, not on a statute.
- Uneven consumer protections. Licensed sportsbooks in regulated US states operate under advertising rules, self-exclusion systems, age verification and responsible-gambling requirements set by state regulators. Derivatives rules were not designed around problem gambling, which is the substance of the criticism regulators have raised.
- Tax and integrity questions left open. State betting taxes, sports-integrity data-sharing obligations and league agreements attach to licensed sportsbooks, not to exchanges operating under federal commodity rules.
- Uncertainty is expensive. Operators, market makers and affiliates have to plan for several possible endings at once, which slows product launches and keeps legal budgets high.
Here is the current who-decides-what map, simplified:
| Layer | Who acts | Where it stands |
|---|---|---|
| Federal legislation | US Congress (CLARITY Act) | Passed the House in 2025; stalled in the Senate |
| Federal regulator | CFTC, under the Commodity Exchange Act | Oversees event contracts; scope of sports contracts contested |
| States | State gaming regulators and attorneys general | Cease-and-desist actions; argue state gambling law applies |
| Courts | Federal courts | Deciding preemption case by case; outcomes have varied |
| Texas specifically | Legislature and voters | Interim discussion only; regular session resumes in an odd-numbered year |
What it means for Indian readers
Nothing in the CLARITY Act changes anything you can legally do from India. That is the honest headline. But the American fight is a preview of an argument India has already had, and settled differently.
India’s own version of this debate ran through “opinion trading” apps, which let users take yes/no positions on news, cricket and entertainment outcomes and marketed themselves as skill-based trading rather than betting. Indian regulators and courts have generally looked past the label to the substance: if money is staked on an uncertain future event, the gambling framework is the starting point. The Promotion and Regulation of Online Gaming Act, 2025 then went further and prohibited offering online money games in India, while creating space for e-sports and social games. Wagering on event outcomes sits squarely inside what that Act targets, whatever the interface looks like. Treat this as general information, not legal advice — if your situation is specific, take advice from an Indian lawyer.
Three practical implications for readers here:
Don’t read US headlines as a green light. A CFTC-regulated exchange being cleared to list sports contracts in the US says nothing about legality, access or recourse for a user in India. Offshore sites that cite American regulatory news as reassurance are doing marketing, not compliance.
Watch the taxonomy argument, because India has the same one. The Indian legal history is built on the game-of-skill versus game-of-chance distinction. The US fight is a different framing of a similar move: relabel a bet as a financial contract and a different regulator applies. India’s 2025 Act shows how a legislature can shut that argument down by defining the activity by its economics rather than its packaging.
Money and tax follow the law, not the app. India’s tax rules on real-money gaming — including tax deducted at source on net winnings and GST on the supply — were written for a market that has since been restricted. Mixing an offshore platform with unclear legal status into that picture creates payment, KYC and reporting risk that has nothing to do with whether the market itself is “fair”.
Key takeaways
- The CLARITY Act, passed by the US House in 2025, has stalled in the Senate. It was the most realistic route to a single federal answer on event contracts.
- Prediction market law in the US is therefore being shaped by federal courts and state regulators, and the results are not uniform across states.
- Texas has opened discussions, but its legislature only sits in regular session in odd-numbered years and gambling expansion there typically needs a voter-approved constitutional amendment. This is a signal, not a change.
- The heart of the dispute is preemption: are sports event contracts federally regulated derivatives, or bets subject to state gambling law?
- Consumer protection is the sharpest criticism. Derivatives rules were not built around age verification, self-exclusion or advertising limits the way state betting licences are.
- For Indian readers, none of this creates access. Online money games are prohibited under the Promotion and Regulation of Online Gaming Act, 2025, and opinion-trading-style products fall within that framing.
- Expect the story to move again through court rulings and any new attempt to attach event-contract language to a broader market-structure bill.
One more thing worth saying plainly: prediction markets are often described as forecasting tools rather than gambling, but taking a paid position on an uncertain outcome carries the same risk of loss, and platform spreads and fees mean the economics favour the house over time. If betting or trading of this kind stops feeling like a choice, deposit and loss limits, cool-off periods and self-exclusion tools exist for a reason, and confidential helplines are available in India and elsewhere.