Tribes look for legal pathways to fight against prediction markets

As the ongoing battle among regulators, state governments, the federal administration, and emerging prediction markets intensifies, tribal entities remain relatively quiet—an anomaly that may soon change.

On a recent installment of the Indian Gaming Association’s “New Normal” webinar series, hosted by Victor Rocha and Jason Giles, three prominent tribal gaming attorneys convened to analyze the implications of prediction markets on tribal sovereignty and gaming rights. This episode follows a series addressing the rising competition posed by sweepstakes sites, shifting focus now to the burgeoning landscape of prediction markets.

Attorneys Joseph Webster, Bryan Newland, and Scott Crowell labeled prediction markets—especially those tied to sports contracts—as an “existential threat” to the Indian gaming sector. Their discussion centered on navigating the best legal approaches to counter this emerging challenge.

Giles, the Executive Director of the IGA in Washington, shared insights from recent discussions with policymakers, many of whom exhibited a concerning lack of awareness about the issues at stake. He cited conversations with Nevada officials who reported no outreach from the state’s commercial operators regarding prediction markets.

To date, tribes have voiced significant opposition to prediction markets. Legally sanctioned across all 50 states, including those with exclusive gaming compacts with tribes, these exchanges pose a unique challenge to tribal gaming rights. Since the Commodity Futures Trading Commission (CFTC) opened a portal for public input on prediction markets earlier this year, tribal interests have predominated the feedback.

While Indian Country hasn’t yet engaged in direct legal action against prediction markets, state regulators are currently entrenched in lawsuits against Kalshi, a key player in this field. However, panelists suggested that tribes hold strategic advantages in this ongoing struggle.

Navigating Jurisdictional Complexities

At the core of this issue lies jurisdiction. Kalshi and similar platforms contend that their operations are federally permissible under CFTC regulations, claiming immunity from state gaming laws. This argument has proven effective thus far; Kalshi successfully obtained preliminary injunctions permitting its operations in Nevada and New Jersey after contesting those states’ decisions.

“From a litigation standpoint, they’re currently achieving significant victories,” Crowell noted with concern.

States now find themselves in the challenging position of contesting the federal government’s authority in this context. Previously contentious, the legality of election betting and prediction markets has shifted under recent presidential administrations.

Notably, Donald Trump Jr. serves as an adviser to Kalshi, while Brian Quintenz—a board member at Kalshi—is being considered for the CFTC chair position. This political landscape drastically alters the dynamics at play; just last month, the CFTC’s appeal regarding election betting was officially withdrawn.

“On Election night at Mar-a-Lago, while biased outlets called the race a coin toss, my family and close friends used the prediction market @Kalshi to know we won hours ahead of the fake news media.”

— Donald Trump Jr. (@DonaldJTrumpJr) January 13, 2025

Consequently, Crowell observed, states and tribes have formed unlikely alliances in this dispute. States now perceive their jurisdictional authority as threatened by unregulated gaming expansion, a sentiment that opens collaborative avenues, particularly for tribes leveraging the Indian Gaming Regulatory Act (IGRA).

The IGRA’s Implications

If the Commodities Exchange Act (CEA) takes precedence over state gaming regulations, Newland posited that IGRA would similarly hold weight. The potential interplay between CEA and IGRA is currently uncertain, yet early arguments against IGRA have not gained traction.

Webster noted that IGRA featured in a Kalshi brief regarding its operations in Nevada. Kalshi asserted that sports contracts fall outside of IGRA’s parameters, and even if they were included, CFTC jurisdiction would prevail.

“They’re essentially positing that the CEA diminishes any role for tribes and tribal regulators in what is clearly a gaming activity,” Webster remarked. “That such arguments remain largely unaddressed is concerning.”

Bringing IGRA into the conflict—even as a counterargument—could provide essential clarity for tribes, Newland argued.

“If it’s gaming, then they are violating tribal laws. If it’s not gaming, then why must we comply with IGRA at all?” he questioned, pinpointing the crux of the debate.

Leveraging Language

Existing CFTC regulations already prohibit contracts related to gaming. However, Kalshi has effectively contended that prediction markets do not constitute gaming. Panelists cautioned that this situation is still “in its early innings,” with forthcoming rulings having the potential to overturn current legal standings. This non-gaming argument has been primarily applied to election betting, not sports contracts.

“Expansion into sports goes far beyond the initial intent of these markets, which were designed to provide genuine economic hedging opportunities,” Newland emphasized. Crowell added that litigators could effectively weaponize Kalshi’s own promotional language against them, highlighting the inconsistencies in their positioning.

Newland likened this linguistic manipulation to a “Jedi mind trick,” quipping, “This is not the gaming you’re looking for.”

“You have to admire their boldness,” Rocha commented. “They exhibit a tribal level of tenacity.”

Mention was made of the National Indian Gaming Commission, one of the few federal bodies associated with tribal gaming. The commission previously ruled that sports betting qualifies as Class III gaming, contradicting Kalshi’s stance. Nevertheless, the NIGC is currently stalled without a confirmed chair for over a year, awaiting new nominations from the Trump administration—a situation that adds layers of uncertainty to ongoing discussions.

Implications for Stakeholders

As this issue evolves, stakeholders must brace for a range of potential outcomes. For many tribes, gaming serves as a crucial economic lifeline, underscoring the necessity for robust asset protection. Commercial operators, in contrast, may lack such urgency; their interests remain safeguarded as long as states engage in legal battles on their behalf. Even if prediction markets become legalized, commercial entities could transition their business models with minimal tax liabilities and reduced regulatory obligations.

Earlier this year, DraftKings sought to register “DraftKings Predict” with the National Futures Association, a move later retracted. Meanwhile, Flutter Entertainment, owner of FanDuel, indicated during a first-quarter earnings call that some staff from its Betfair exchange were being reassigned to explore potential opportunities in prediction markets.

“We’re interested in the opportunity and have relocated some team members with relevant experience from Betfair to analyze this potential,” the company stated.

Tribes will need to brace for swift changes and adapt to protect their interests, a familiar yet urgent challenge. Crowell, who has extensive experience in tribal gaming, asserted, “I’ve never witnessed an existential threat escalate so rapidly.”

“This challenge isn’t on the horizon; it is already upon us,” Webster concurred.