Iowa lawmakers are pressing ahead with a bill that would clamp down on a fast-expanding slice of financial trading tied to real-world outcomes via prediction markets. The measure, known as Senate File 2494, is aimed at event-driven contracts and the online platforms where people buy and sell them.
The Senate Ways and Means Committee introduced the bill on Wednesday (April 15) and quickly moved it forward. Lawmakers are pitching it as a way to bring structure and oversight to prediction-style markets that have grown exponentially in the past two years.
The bill proposes a new definition for “designated contract markets,” described as “a digital marketplace for trading event-driven contracts that is also regulated by the federal commodity futures trading commission.” The legislation also spells out what counts as an event-driven contract, calling it “a financial derivative…that provides a fixed binary payout based upon the occurrence or nonoccurrence of a specific future event.”
Iowa prediction markets bill proposes restrictions on officials and insider activity
The bill states, “A public employee, public official, or lobbyist, or an immediate family member…shall not buy or sell an event-driven contract…relating to state or local legislative actions or other governmental actions.”
Breaking that rule could trigger both professional and criminal consequences. Lawmakers wrote that anyone who knowingly violates key ethics provisions “is guilty of a serious misdemeanor and may be reprimanded, suspended, or dismissed from the person’s position or otherwise sanctioned.”
The proposal adds that by requiring platforms to screen out a wide swath of participants. This includes company employees, insiders, and anyone with “insider information on a particular event-driven contract.” Operators would also need systems to detect manipulation and report suspicious activity to the state attorney general.
Consumer protections are another major piece of the bill. Users would have to be at least 21 years old, and platforms would need to shut down underage accounts, unwind trades, and return funds if mistakes happen. Companies would also be required to offer tools that limit deposits and time spent trading, along with options for self-exclusion and visible problem gambling resources.
Advertising would face tighter guardrails. Promotions could not “imply trading is risk-free or use similar language” or target vulnerable audiences.
The push in Iowa comes as prediction market operators face growing scrutiny across the country. While a separate bill related to these markets has already cleared the Senate, this proposal is still working its way through the legislative process.
At the same time, the effort is colliding with federal authority questions. Prediction market firm Kalshi has filed a lawsuit challenging Iowa’s approach, arguing that federal regulators—not states—should oversee these contracts.
For now, Iowa’s proposal would give the attorney general broad enforcement powers, including fines up to $10,000 per violation and $50,000 for repeat offenses. Companies that ignore court orders could face a $1 million daily penalty.
Before launching in the state, platforms would also need to submit detailed internal control plans covering age checks, fraud prevention, and compliance systems.
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