Donald Trump Jr. and White House Intervene in Prediction Market Regulation Fight

The regulatory landscape for prediction markets in the United States is currently undergoing an unprecedented level of politicization. Both the White House and Donald Trump Jr. have actively entered battles at the state level to bolster the position of platforms such as Kalshi and Polymarket. While President Donald Trump previously characterized these markets in May as a new form of Financial Market, recent details reveal just how deep the behind-the-scenes support truly goes. This is no longer just a theoretical debate but a clash of significant economic interests against established gambling monopolies.

Donald Trump Jr. appeared at a three-day retreat for Republican state Attorneys General in New Orleans in early March. Alongside Montana Attorney General Austin Knudsen, he made his case for a favorable regulation of prediction markets. The personal stakes are clear: Trump Jr. joined Kalshi as a strategic adviser in January 2025 and received $300,000 in company shares as part of his compensation. He also advises Polymarket and holds a stake via his investment firm, 1789 Capital. In New Orleans, he argued that state officials were being influenced by vested interests, specifically traditional gambling companies seeking to protect their monopolies by opposing prediction markets.

Numbers and facts

North Carolina has become a central theater in this conflict. Initially, lawmakers introduced House Bill 1171, which would have placed prediction markets under state gambling statutes, effectively banning them for residents. However, the White House communicated its position on state regulation to legislators, leading to a drastic shift in policy. The resulting budget imposed only a 6 percent tax on prediction market revenue. In contrast, sports betting in North Carolina is taxed at 23 percent, representing a significant privilege for the new platforms. Kalshi defended this by stating that prediction markets and sportsbooks have fundamentally different revenue structures.

“Election markets are here to stay. Prediction markets have been banned, censored, limited and pushed out for decades. This win solidifies their right to exist and thrive.” - Tarek Mansour, CEO of Kalshi

The Commodity Futures Trading Commission (CFTC) has meanwhile dropped its fight against certain election contracts. This followed a series of legal defeats against Kalshi, where courts found the commission failed to demonstrate public harm. Despite this, the situation remains complex. The CFTC has filed lawsuits against nine states attempting to regulate prediction markets independently. Interestingly, all nine states are led by Democratic governors. The CFTC denies political bias, claiming it merely responded to the states taking the most aggressive actions.

Background

The core of the debate is the classification of these products. Are they bets on events, or are they financial derivatives for hedging economic risks? Donald Trump Jr. characterized them as sophisticated financial products already subject to federal oversight, arguing they should not be subject to state-level gambling regulation. This strategy aims to bypass the patchwork of 50 different state laws. The involvement of Jim Harrell, a former North Carolina legislator and current Kalshi lobbyist, underscores the professional nature of the industry's lobbying efforts. Harrell was instrumental in securing lower tax rates and ensuring that CFTC-registered platforms can operate without a state license.

Why it matters for German players

For players in Germany, the U.S. situation serves as an interesting case study on the separation between financial markets and gambling. In Germany, the legal situation is very strict due to the Interstate Treaty on Gambling 2021 (GlüStV 2021). While the U.S. debates a 6 percent tax, Germany applies a 5.3 percent stake tax on sports betting. Prediction markets like those offered by Kalshi are hardly accessible in a legal form in Germany, as they would likely be classified as betting on social events. The GlüStV 2021 primarily allows betting on sports events and their outcomes. Event betting outside of sports is extremely limited in the licensed German market.

German users must also adhere to strict limits, such as the cross-provider deposit limit of 1,000 euros per month, monitored via the LUGAS system. While in the U.S., the CFTC as a federal agency attempts to maintain exclusive control, the Joint Gambling Authority of the States (GGL) is the central regulatory body in Germany. German players should ensure they only play with providers listed on the official GGL whitelist. U.S. platforms without a German license do not offer protection under German law or the mandatory player protection mechanisms like OASIS.

What it means for GGL-licensed casinos

For operators with a GGL license, the developments in the U.S. represent potential competitive pressure from new product categories. If prediction markets establish themselves internationally as pure financial products, they might attempt to bypass strict gambling regulations. German casinos must continue to follow the 1 euro stake limit per spin for virtual slots and strict advertising bans. However, the U.S. market shows that targeted lobbying and classification as a financial product can lead to tax advantages that are currently unthinkable in the rigid German regulatory framework. The GGL will monitor these developments closely to ensure no gray markets emerge under the guise of financial products.