US Senators seek prediction market rules to protect tribal gaming
A group of 11 Democratic US senators, led by Senator Martin Heinrich of New Mexico, has urged Congress to tighten regulations on prediction markets through amendments to two proposed cryptocurrency bills.
In a letter to the Senate Banking Committee and Senate Agriculture Committee, the lawmakers said the Digital Asset Market Clarity (CLARITY) Act and the Digital Commodity Intermediaries Act (DCIA) could create loopholes allowing prediction market platforms to offer sports betting and casino-style event contracts nationwide while bypassing state gambling laws and tribal gaming agreements.
Senators wrote, “We write with urgency regarding the continued lack of proper regulation over prediction markets and the resulting circumvention of state and Tribal gaming regulatory frameworks.”
Senator’s proposal
Heinrich’s proposal aims to properly define the boundaries of prediction markets. Heinrich and the other senators who support him argue that such platforms use US federal law dealing with commodities and derivatives to provide betting services similar to those found in sports betting.
This creates what they see as a regulatory imbalance, since licensed sportsbooks and tribal casinos must comply with strict consumer protection standards, taxation, licensing fees, responsible gambling measures, and tribal-state compacts. At the same time, prediction market operators avoid many of these obligations.
This is accomplished by two proposed adjustments. These include protecting IGRA so that federal regulations on digital assets do not override tribal gambling powers, as well as prohibiting CFTC-regulated businesses from listing sports betting or casino-like prediction contracts, which will prevent prediction markets from becoming national sportsbooks.
Tribal rights under scrutiny
Many tribes in the United States rely on casino revenues to fund healthcare, education, housing, construction, emergency services, cultural preservation, and employment. The IGRA allows tribes to strike deals with the state while maintaining sovereignty over their gambling enterprises.
According to Heinrich, prediction markets would destabilise the process. If the federal government’s regulated platform can conduct state-wide betting games while breaking tribal casinos’ exclusivity, tribal casinos will be disadvantaged because they will still have to meet stringent licensing standards. Senators have suggested that the rapid expansion of these marketplaces is an attack on tribal sovereignty.
The CLARITY Act and the Digital Commodity Intermediaries Act were not initially intended to oversee gambling legislation. Both statutes focus on digital assets, cryptocurrency exchanges, DeFi platforms, and commodity trading. Lawmakers worry, however, that both proposals may contain features that allow prediction markets to circumvent gambling regulations.
Heinrich’s letter warns that exemptions for decentralised finance providers and digital commodity platforms may allow prediction markets to evolve into casino-style products without adhering to standard gambling regulations.
Supporters of the bills argue these concerns are overstated, saying the legislation is meant to modernise cryptocurrency regulation rather than legalise gambling. Still, the issue has become more contentious as Senate negotiations continue.
New Mexico’s legal battle against Kalshi
New Mexico has emerged as a focal point of the prediction market debate. According to the IGRA, the issues began in May 2026 when four tribes sued Kalshi for offering online sports gambling services without the requisite permits. The tribes asserted that Kalshi’s bets through its sports partnerships resembled traditional bets, therefore violating the tribal-state compact, which affords tribes exclusive gambling rights.
In June, the Attorney General of New Mexico, Raúl Torrez, filed another complaint against Kalshi for supplying illegal gambling services, which were only permitted in New Mexico through tribal casinos.
The state argued Kalshi’s contracts were indistinguishable from sports bets. At the same time, Kalshi maintained they were federally regulated event contracts under the Commodity Exchange Act and therefore under the jurisdiction of the CFTC.
States are concerned
States are concerned that prediction markets may allow the creation of a national betting system that operates outside normal regulatory oversight. Sportsbooks and tribal casinos make major investments in compliance initiatives, responsible gambling features, anti-money laundering procedures, and taxes that fund state programmes. Prediction market operators are criticised for failing to follow many of these procedures, despite offering a product that is substantially similar.
Consumer protection is another concern. State commissions carry out age verification, self-exclusion, advertising restrictions, dispute resolution, and responsible gambling initiatives. If prediction markets emerge under commodities laws rather than gambling regulations, there will be no comparable consumer protection.
Finally, tax revenue is vital. States rely on tax income from legal betting activity, and any transition to federal regulation and prediction markets may have an impact on state and tribal revenue.
Support for Heinrich’s proposal
Senator Heinrich’s proposal has earned widespread support among political officials and Indigenous organisations. Eleven Democratic senators, including Maria Cantwell, Richard Blumenthal, Mark Kelly, Patty Murray, Tammy Baldwin, Alex Padilla, Jacky Rosen, Adam Schiff, Brian Schatz, Gary Peters, and Tina Smith, signed a letter urging Congress to amend digital asset legislation to protect tribal authority and prevent prediction markets from operating as national sportsbooks.
The letter was supported by the Indian Gaming Association, the National Congress of American Indians, and 17 New Mexico tribal governments, including the Santa Ana, Sandia, Isleta, Laguna, Acoma, Taos, and Pojoaque pueblos, as well as the Mescalero Apache Tribe.
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