As tribal leaders convene in Washington, D.C., this week, the ongoing battle against sports prediction markets is expected to take center stage.
The Indian Gaming Association (IGA), along with other allied groups, is pushing back against this growing trend.
They feel prediction markets sidestep authority, ignore state laws and threaten tribal economies.
These platforms, including Kalshi,DraftKings (which just partnered with Crypto.com), FanDuel, and Fanatics (which has already been challenged by Tribal leaders). They operate under the guidance of the Commodity Futures Trading Commission (CFTC). Unlike traditional gambling, they function as financial derivatives.
Understanding Prediction Markets: A Simple Guide
Prediction markets are online platforms where people can bet on the outcomes of real-world events.
These events can range from political elections to sporting events and even weather patterns. In simple terms, these platforms allow people to trade contracts based on what they think will happen in the future.
How Do They Work?
Prediction markets are a lot like stock markets, but instead of trading stocks or commodities, people trade contracts related to events.
For example, you might buy a contract on whether a particular team will win a game or whether a certain candidate will win an election.
Participants buy contracts based on what they believe will happen, and they use real money to back their predictions. As more people trade, the prices of these contracts change.
These price changes represent the market's best guess about how likely an event is to occur.
Why Do People Use Them?
People use prediction markets because they bring together diverse opinions and information. When many people with diverse perspectives buy contracts, the resulting prices can offer insightful predictions about future events.
For example, if many people believe a team will win a championship, the contracts for that outcome might be higher in price. This reflects the market's belief that this is a likely result.
In short, prediction markets are platforms where people bet on the outcomes of various events.
They function like financial markets but focus on predicting future events rather than trading traditional assets. These markets offer a way to gauge collective wisdom and opinions about what might happen next.
Concerns Raised by the IGA
The IGA and groups like the American Gaming Association (AGA) have raised several concerns about these markets:
Bypassing Tribal Authority: The Indian Gaming Regulatory Act (IGRA) grants tribes the exclusive right to regulate gaming on their lands. Prediction markets are seen as sidestepping this authority, allowing betting on or affecting tribal lands without the necessary tribal agreements or licenses.
Ignoring State Laws and Protections: These markets may bypass state laws that ensure consumer protections, like age restrictions and responsible gaming measures, potentially undermining the integrity of regulated sports betting.
Threat to Tribal Economies: According to analyses such as a Brookings Institution report, prediction markets present an "existential threat" to tribal gaming economies. These platforms are viewed as drawing billions of dollars in revenue away from regulated tribal sportsbooks each year.
Recent Actions by the IGA and Allies
In December, IGA Chairman David Bean called for Congressional action to address what he termed "illegal prediction market gambling." The IGA and AGA have jointly urged Congress to close loopholes and address the impact on the $329 billion regulated gaming industry.
Tribes have taken legal action as well:
Supporting Regulators: The IGA and 16 tribes filed amicus briefs supporting state regulators, such as those in Connecticut, against platforms like Kalshi and Robinhood.
Lawsuits and Court Rulings: California tribes have pursued lawsuits against Kalshi, and a Massachusetts court has limited Kalshi's ability to offer sports contracts.
Tribal Leaders Meeting: A Platform for Advocacy
This week’s gathering of tribal leaders in Washington, D.C., coincides with events like the NCAI Executive Council Winter Session.
It's a key moment for the IGA to amplify its cause, urging Congress to intervene.
Whether through new crypto or market structure bills, or potentially awaiting the Supreme Court's clarification on regulatory jurisdictions, the aim remains clear.
The Broader Industry Conflict
This conflict between traditional tribal and commercial gaming interests and new prediction market platforms is significant.
While tribes see these markets as a threat to their regulatory frameworks, the platforms argue they are distinct financial tools under CFTC rules. This battle continues to unfold in courts, agencies, and Congress, with tribes unified in their opposition through the IGA.
As tribal leaders meet in Washington, the push against sports prediction markets stands out as a pivotal issue. The outcome of this conflict could shape the future of tribal gaming and its regulatory landscape.
