- Legislation in Iowa seeks to force prediction markets to obtain state licenses
- The licenses would come with hefty costs, including an upfront $10 million fee
- Prediction markets say their federal regulation supersedes state laws
Prediction markets are regulated by the Commodity Futures Trading Commission (CFTC), but lawmakers in Iowa want to have a say in how they conduct business in the Hawkeye State.
Prediction markets have attracted the scorn of state attorneys general, gaming regulators, and lawmakers since the derivative trading platforms began offering contracts involving sports last year. The American Gaming Association (AGA) and Indian Gaming Association (IGA) have called on the CFTC and Congress to force prediction markets to cease offering sports contracts on the grounds that the trading constitutes sports betting and violates state gaming laws.
In Iowa, state lawmakers are trying to take the prediction markets matter into their own hands.
Senate File 2085, introduced by Iowa Majority Leader Mike Klimesh (R-Howard), would require prediction markets to obtain a permit to conduct business in the state.
Iowa Prediction Markets Bill
SF2085 would only allow prediction markets licensed by the Iowa Department of Revenue to conduct derivative trading within the state.
The cost for entry would be high, with PM licenses going for an upfront fee of $10 million. Licenses would need to be renewed annually at $100K. The cost of doing business doesn’t end there. Prediction markets would need to send 20% of their gross revenues from trading in Iowa to the state.
PMs currently operating in Iowa that stand to be impacted include Kalshi, DraftKings Predictions, FanDuel Predicts, PrizePicks, and Fanatics Markets.
Klimesh was elected to succeed state Sen. Jack Whitver (R-Polk) last September. The former mayor of Spillville, Klimesh’s focus points for the 2026 legislative session, along with regulating prediction markets on the state level, include expanding carbon dioxide pipeline projects, making energy more affordable, and fostering bipartisanship in Des Moines.
PM Pushback
Kalshi and the like continue to defend their online prediction markets in various state courthouses. The financial exchanges claim that their CFTC regulation supersedes state laws, including gaming laws, under the Supremacy Clause of the US Constitution.
However, CFTC-regulated derivative markets are not to engage in contracts that involve gambling.
An event contract, also known as a prediction or information contract, is a derivative contract whose payoff is based on a specified event, occurrence, or value such as the value of a macroeconomic indicator, corporate earnings, level of snowfall, or dollar value of damages caused by a hurricane. CFTC Regulation 40.11 prohibits event contracts that reference terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law, or that involves, relates to, or references an activity that is similar to any of those activities and that the CFTC determines by rule or regulation to be contrary to the public interest,” the CFTC explains.
SF2085 has been directed to the Iowa Senate Ways and Means Committee for initial review.
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