It should be acknowledged from the outset that prediction markets are not new. For thousands of years, humans have made predictions, backed by their personal wealth, about future events that ran counter to conventional thinking and the visions of their peers. In the U.S., political markets from the late 1800s through the mid-1900s often picked presidential winners, outperforming political polls. Mix in some messy court cases and legitimate concerns about organized crime, and these practices generally died off domestically for a time. Recent developments, including the rise of modern tech platforms and applications, have expanded consumers’ access to “forecasting markets” and reignited interest in them, with some expecting the total value to reach $1 trillion annually within a few years.

Prediction markets have sparked a familiar state-federal turf war, despite the absence of any major scandal or market failure. Some states want to label the activities as gambling, an area generally policed by state law. That keeps open a lucrative tax stream, shields entrenched industries, and gives states a ready-made excuse to block these platforms outright.

The federal government rightfully sees it differently. The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) argue that prediction markets are event contracts or securities and therefore belong under federal law. President Trump has now joined that fight, backing the CFTC’s court challenges to state interference and signaling support for a single national framework that would let the United States compete in a fast-growing global marketplace.

Substantively, calling prediction markets gambling is beyond a stretch, even when sports are involved. If that logic holds, much of the U.S. economy belongs in the same bucket: financial hedging, real estate speculation, debt financing, insurance, hog and oil futures, currency trading, and more. Policy should not cry “gambling” simply because people risk money on a well-informed view of an uncertain future.

More broadly, whether a given modern activity is gambling or creating a future may seem like hair-splitting. The demarcation between the two activities stems from a past society’s desire to ban gambling and promote a regulated futures industry. But Americans’ views toward gambling have changed substantially as casinos, lotteries, poker tournaments, sports betting and similar activities, both in physical facilities and online, have exploded in popularity and use throughout the nation.

The more appropriate debate and thus perspective is that current prediction markets are interstate or global. The vast majority of users are outside the borders of New York City (Kalshi, Gemini), Panama (Polymarket), or another platform’s home base. That gives the federal government an extensive role under the U.S. Constitution’s Commerce Clause to preempt state jurisdictional claims and explicitly assign jurisdiction to a federal agency or the court system for implementation and oversight. In fact, the CFTC has argued quite convincingly in court that Congress has previously done so in numerous instances for event contracts (or “swaps,” as the agency refers to them). That is, it has already been decided.

Even in the case of gambling, the courts have upheld Congress’s broad authority to restrict individuals’ participation and to usurp state involvement. This should give the Trump Administration wide latitude to push the preemption button on many fronts for the sector, including advocating before Congress and continuing the court battles.

The larger lesson is hard to miss: state-by-state tech regulation has been a mess. Instead of protecting consumers, it has fractured markets, piled on conflicting mandates, and raised the cost of serving Americans across state lines. Those burdens act as barriers to entry, narrowing where companies can operate and leaving other markets behind. Commercial privacy law is just one cautionary tale—an overlapping patchwork of state rules that has burdened interstate commerce and delivered little in return.

The words in Ecclesiastes had it right: we have seen this before. Experience from past state fights over tech policy should make it simple—prediction markets should not be carved up by fifty regulators. If rules are needed, they should be designed from a national perspective with a recognition of interstate commerce.

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While it comes as the FCC is facing criticism that it’s threatening Disney’s First Amendment rights by calling for early license renewals of its ABC stations following criticism from President Trump, this legislation has been in the making for years. Cruz initially drafted the bill over concerns the Biden administration pressured social media companies to change content policies that related to COVID-19 posts that it disfavored. That’s the backdrop for Murthy v. Missouri, in which the Supreme Court ruled 6-3 that Missouri and Louisiana, along with several social media users, lacked standing to sue the federal government over its communication with social media companies regarding content moderation.

Cruz secured Wyden as a co-sponsor, and whether more Democrats follow may depend on how much sway the broad range of First Amendment advocacy organizations backing the bill carry. The ACLU, Public Knowledge and the Knight First Amendment Institute at Columbia University are among its supporters.

It’s unclear if the bill will get far given the inevitable controversies over what constitutes jawboning—defined as when government pressures private companies to censor speech protected by the First Amendment. Recent FCC doings also may make the legislation more attractive to Dems. Not only is there the early license renewal that Chairman Brendan Carr has tied to a Disney DEI investigation, but there’s the agency’s examination of “The View” in light of the equal time rule and last fall’s ABC suspension of Jimmy Kimmel, which some argue came in response to Carr’s ‘easy way or hard way’ comment to broadcasters on a podcast.

According to a source, the original draft of the bill focused on social media platforms with Wyden broadening it to include broadcasters. Recent jawboning accusations aren’t exclusive to broadcast. A federal judge recently ordered the government to stop pressuring Meta to take down Facebook groups coordinating sighting of ICE officers.

Dubbed the JAWBONE Act (Justice Against Weaponized Bureaucratic Overreach to Networked Expression Act), the legislation would let Americans sue federal officials for violating the First Amendment when they coerce social media companies, AI platforms or broadcasters to change or take down protected speech. Plaintiffs would have the ability to obtain money damages and reasonable attorney fees. It would also require agencies to submit to Congress certain communications with companies, ultimately strengthening oversight and accountability.

Cruz didn’t mention the Disney-ABC dust-up in a statement on the bill, instead declaring that the Biden administration “weaponized the Cybersecurity and Infrastructure Security Agency to pressure Big Tech into ‘canceling’ Americans who spoke out against vaccine mandates and election fraud.”

Wyden, however, cited President Trump “threatening cable companies because he doesn’t like their late-night shows” as the “most blatant example” of jawboning. “Nearly all of Americans’ speech—including TV news, online streams and social media—flows through private corporations that are highly susceptible to government pressure. Regular Americans can’t count on those companies to stand up to government jawboning, they need a way to level the playing field,” Wyden said.

If the JAWBONE Act passes, would it actually deter a president from making phone calls or posting things on social media?

“The president and anyone else who works in government have their own First Amendment rights. The president can go on Truth Social and say, ‘I hate the New York Times,’ ‘I hate The View,’” Morgan Wilsmann, policy analyst for Public Knowledge, told CFX. “I think ultimately what winning would look like is specifically amongst executive agencies like the DOJ and FCC. It’s the opportunity for speech intermediaries that are targeted to have the ability to say ‘I think that this is jawboning and I need to have the opportunity to actually prove [it].’”

Take Disney’s petition last month at the FCC claiming the agency’s scrutiny of “The View” threatens to “chill critical protected speech.” “It’s full of, ‘here’s why this request violates the First Amendment,’ but what recourse do they have other than going through this very convoluted FCC process,” she said. “Winning in our view is that speech intermediaries like Disney ABC have the ability to fight back against what they see as unconstitutional jawboning… Ultimately, I really hope that if and when it passes, we can finally do something more productive than relitigating something that has happened five or six years ago in terms of online speech.” – Amy Maclean

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