The U.S. derivatives regulator’s initiative to broaden prediction markets related to sports events is facing significant backlash from tribal leaders and several lawmakers, who caution that it may jeopardize established gaming agreements and shift billions in revenue.
Michael Selig, the chairman of the U.S. Commodity Futures Trading Commission (CFTC), has expressed backing for permitting federally regulated platforms to introduce contracts linked to sports outcomes, regarding such offerings as financial instruments instead of bets. His statements during a congressional hearing on Wednesday have raised alarms among tribal representatives.
During discussions with the House Agriculture Committee, Selig stated that prediction markets could “contribute to price discovery,” highlighting the agency’s belief that sports-related contracts should be classified under the Commodity Exchange Act as swaps, not as gambling overseen by states or tribes.
However, tribal representatives contend that this differentiation jeopardizes decades of negotiated exclusivity guaranteed under the Indian Gaming Regulatory Act, which supports tribal-state agreements throughout the nation.
“If the federal government categorizes these as commodities instead of bets, it dismantles the foundation of tribal exclusivity,” asserted David Bean, chairman of the Indian Gaming Association. “This isn’t modernization — it’s obliteration.”
Bean cautioned that federally sanctioned prediction markets could diminish tribal income and employment, stating: “Prediction markets pose risks to rural jobs and the advancements we’ve made by breaching our laws, federal legislation, and the statutes of our state partners.”
He highlighted the similarities between existing betting options and prediction markets, commenting: “Open your Kalshi app for a moment, and you’ll see identical bets that are available in every legal sportsbook.”
Lawmakers voiced similar apprehensions during congressional sessions, questioning whether these products genuinely differ from conventional sports betting.
“In too many instances, it’s merely gambling under another name,” remarked Jim Costa, a U.S. Representative, who added that these products “aren’t some innovative harmless financial offering.”
Costa warned that allowing contracts for “sports, politics, and even aspects surrounding war, instability, and human suffering” might undermine public confidence and tribal agreements. He noted that the CFTC risks “appearing more like an enabler than a market regulator.”
“I doubt Congress intended for sports betting to be repackaged as a financial instrument to evade regulations that apply to others — including our tribes,” he remarked.
Another U.S. Representative, Gabe Vasquez, echoed these concerns, stating that consumers “aren’t concerned whether they’re using an official sportsbook.”
“Tribes in my area have engaged in lengthy negotiations, agreements, and settlements,” Vasquez said. “When a federal agency permits prediction markets to circumvent these longstanding stipulations, it undermines tribal sovereignty and state protections.”
Vasquez challenged the CFTC’s portrayal of these products as risk-management tools, asserting: “Respectfully, I don’t see this as hedging. This is clearly sports betting.”
“If this product resembles sports betting, the public should expect the same protections and regulations associated with sports betting,” he added. “Ultimately, this raises a fundamental question: Are we addressing real economic risks, or allowing prediction markets to siphon billions in a chaotic, unregulated environment as Congress and the CFTC look away?”
The CFTC has suggested that state gambling laws may be overridden when applied to federally regulated event contracts, further escalating tensions with tribal authorities.
CFTC Enforcement Director David Miller cautioned that specific contracts, such as those linked to player performance or injuries, pose risks related to manipulation and insider trading, though he stated that these issues revolve around market integrity, not gaming enforcement.
Tribal leaders assert that such distinctions overlook the larger implications for their regulatory power and economic foundation, arguing that classifying sports prediction markets as financial instruments may effectively nullify tribal-state compacts.
James Siva, chairman of the California Nations Indian Gaming Association, stated that the regulator is advancing without sufficient consultation.
“It’s straightforward. They can refer to these as prediction markets or sports event contracts, but it amounts to illegal sports betting with minimal oversight,” Siva concluded.
“This is, without embellishment, the most substantial and rapidly evolving threat our industry has encountered in over three decades.”
This discussion arises as the CFTC progresses with a proposed rule on prediction markets issued on March 12, which would outline the types of event contracts that exchanges may offer. The proposal has sparked extensive feedback from tribal governments, regulators, scholars, and industry stakeholders.
Critics maintain that Congress did not intend for contracts tied to gaming to be permissible under the Commodity Exchange Act, and emphasize that sports betting remains subject to state regulation after the Murphy v. NCAA ruling.
Tribal representatives argue that the resolution of the rulemaking could alter the dynamics between federal oversight and state-regulated gaming, with significant ramifications for tribal sovereignty and revenues.