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As Native American tribes remain firmly opposed to the expansion of prediction markets into sports-event contracts, lawyers warn that they are an external threat to their gaming operations and their sovereignty.
Prediction-market platforms, such as Kalshi and Crypto.com, have expanded their offerings beyond political event contracts to include sports. These platforms, which are registered with the U.S. Commodity Futures Trading Commission (CFTC), operate across all 50 states, including in Hawaii and Utah – states that have no legal gaming market.
These platforms are also not subject to gaming taxes or formal responsible gambling measures, which is raising concerns among tribal gaming operators and their advisors about their competitive impact on the $41bn U.S. tribal gaming market.
“I think it’s an important issue and a big threat and challenge to the tribal gaming industry,” said Bryan Newland, a principal with the law firm of Powers Pyles Sutter & Verville PC, who has also served as the U.S. assistant secretary for Indian affairs at the Department of the Interior (DOI) under the Biden administration.
Newland explained that in theory, futures markets or event contracts serve a valid purpose because they allow companies, financial institutions and individuals to hedge investment risks, while providing the opportunity to predict things that are important to the economy.
“At its core, investing in the stock market or any futures market looks a lot like gambling, and we’ve made these distinctions between what we value for economic purposes and what we value for entertainment,” Newland said Wednesday (May 14) during a webinar hosted by the Indian Gaming Association (IGA).
But when prediction markets stray into entertainment, Newland said, “we typically view that as gambling and that’s what tribes have been using to support our communities for my entire lifetime”.
“So, if you morph the other thing that is supposed to be used for economic purposes and turn it into entertainment (or) gambling and self-certify, which is something that Kalshi was allowed to do, it is basically saying you are complying with the law,” Newland added.
“We don’t need your permission, and all of a sudden, they can offer sports betting to every 18-year-old in the entire country, including on the reservation. That is a huge market advantage and it’s a huge threat to the Indian gaming community. And it goes far beyond what was ever intended with futures trading and these prediction markets.”
Newland believes the National Indian Gaming Commission (NIGC) has to have a say about the issue of prediction markets.
In May 2024, the CFTC issued a proposed rule to further specify types of event contracts that fall within the scope of the Commodity Exchange Act and are contrary to the public interest, including gaming.
As such, Newland stressed that “gaming is prohibited for futures contracts”.
“That rule was never shared with the DOI, wasn’t shared with the NIGC that I’m aware of, or talks with folks in the government that have expertise on gaming weren’t a part of that discussion.”
Kalshi Event Contracts Lawsuits
Scott Crowell, an attorney with the Crowell Law Office Tribal Advocacy Group, believes the Trump administration has abandoned oversight of this issue, with the CFTC last week dropping its appeal of a court decision that allowed Kalshi to list contracts based on election outcomes.
The CFTC walking away from the appeal at a time of uncertainty in how prediction markets could be regulated has Newland and Crowell concerned about risks to the tribal gaming industry.
“The CFTC looks like it was taking on that responsibility and told Kalshi they couldn’t go forward, which was the first case (Kalshi) secured a victory at the trial court saying betting on elections isn’t gaming,” Crowell said.
Crowell and Newland were joined on the webinar discussing how prediction markets undermine tribal rights by Joseph Webster, managing partner with Hobbs, Straus, Dean and Walker; Victor Rocha, conference chair with IGA, and Jason Giles, executive director with the IGA.
“They are on a roll,” Crowell said. “As soon as Nevada, New Jersey and Maryland issued cease-and-desist letters, Kalshi turned around and sued them. We now have two federal district court orders denying Nevada and New Jersey's motions for temporary restraining orders.”
The New Jersey Division of Gaming Enforcement (DGE) recently filed an appeal with the Third Circuit Court of Appeals claiming the CFTC was not created to include sports betting. The DGE believes Kalshi is listing “unauthorized” wagers.
The Maryland Lottery and Gaming Control Commission also filed its response in opposition to Kalshi’s request for a preliminary injunction, alleging the sports-event contract violates state gaming laws. Kalshi has argued that the actions taken by state gaming regulators are unconstitutional and violate federal law.
Webster believes there will be more litigation before the issue goes before the U.S. Supreme Court at some point.
Crowell said the expansion of prediction markets into sports events “falls into the genre of 'we don’t care what the laws say, we are just going to do it anyway'.”
“When you have this self-certification, when companies like Kalshi once they are properly registered, it’s not like, 'Okay, CFTC, this is what we are going to do; tell us if it’s legal,” Crowell said. “It’s, 'no, we are going to self-certify our decision and make that call ourselves'.”
