The political landscape surrounding prediction markets has intensified, with both the White House and Donald Trump Jr. actively participating in discussions at the state level. This involvement adds a new layer to the ongoing regulatory debate in the industry.
Recent reports indicate that the Trump administration's backing of prediction markets extends beyond mere public endorsements and federal policy. Donald Trump Jr. reportedly engaged directly with state officials, advocating for the burgeoning industry.
A New York Times investigation revealed that earlier this year, Trump Jr. presented a closed-door appeal for prediction markets to Republican state attorneys general. Meanwhile, the White House communicated its stance on state regulations to lawmakers in North Carolina, who were deliberating legislation impacting these platforms.
This development complements President Trump's previous public endorsement of prediction markets, which he referred to as a “new form of Financial Market” in May. He emphasized the importance of preserving the Commodity Futures Trading Commission’s (CFTC) exclusive jurisdiction over this sector.
During a three-day retreat for Republican state attorneys general in New Orleans, Trump Jr. made his case for prediction markets alongside Montana Attorney General Austin Knudsen. Notably, Montana was one of the first states to challenge Kalshi's sports event contracts, leading to cease-and-desist orders before Kalshi initiated a lawsuit against Knudsen in federal court.
Trump Jr. contended that state officials were being swayed by traditional gambling entities aiming to protect their monopolies by opposing prediction markets. He framed prediction markets as advanced financial products that should fall under federal oversight rather than state regulation.
These remarks are particularly significant given Trump Jr.'s financial connections to the industry. He became a strategic adviser for Kalshi in January 2025, receiving approximately $300,000 in company shares as part of his compensation. Additionally, he serves as an adviser to Polymarket, and his investment firm, 1789 Capital, holds a stake in the company.
A spokesperson for Trump Jr. clarified that he does not engage with the federal government on behalf of any company he advises or invests in.
Kalshi responded to the Times article, stating that the publication posed various questions but largely ignored responses that did not fit the narrative being promoted. They emphasized that Trump Jr. is a supporter of the industry and provides marketing strategy advice, but does not offer regulatory guidance.
Moreover, the White House's involvement with North Carolina lawmakers came as the state was crafting its prediction market policy. Earlier this year, Democratic Rep. Pricey Harrison and two other legislators introduced House Bill 1171, which sought to integrate prediction markets into the state's gambling laws, explicitly prohibiting residents from wagering on these markets. However, the bill did not progress beyond its initial committee.
In contrast, the final budget took a different approach, imposing a 6% tax on prediction markets as part of the state budget. Lawmakers acknowledged that CFTC-registered platforms could legally operate in the state without requiring a state license.
According to the Times, former North Carolina legislator and current Kalshi lobbyist Jim Harrell played a role in shaping this provision during discussions with Republican House leaders. Kalshi's input reportedly helped secure a lower tax rate than what lawmakers had initially proposed.