House lawmakers query sports activities prediction markets as tribes defend gaming authority

House lawmakers questioned Tuesday whether or not federally regulated sports-event prediction markets are working outdoors state and tribal gaming legal guidelines, as litigation over the markets continues in a number of states.

A House hearing, convened by the Subcommittee on Commodity Markets, got here as Kalshi and different federally regulated exchanges face lawsuits from tribes and state regulators who argue the exchanges’ sports-event contracts are topic to state gaming legal guidelines and the Indian Gaming Regulatory Act. The exchanges keep the contracts are monetary derivatives ruled by the Commodity Exchange Act.

Lawmakers centered on whether or not the markets expose minors to playing, weaken client protections and erode tribal and state authority over sports activities wagering.

The panel featured 5 witnesses: Indian Gaming Association Chairman David Bean, American Gaming Association Senior Vice President Chris Cylke, former CFTC counsel and Morgan, Lewis & Bockius LLP associate Rob Schwartz, derivatives legal professional Carl Kennedy of Katten Muchin Rosenman and Solidus Labs CEO Asaf Meir.

Lawmakers raised an array of considerations, starting from the CFTC’s lack of staffing to potential buyer abuse and gaming integrity questions.

Rep. Shomari Figures (D-Ala.) mentioned the platforms are reaching minors and bypassing the guardrails tribes and states require.

“These kids are going and gambling,” Figures mentioned. “These prediction markets are sports betting and should be regulated as such.”

Bean advised lawmakers that prediction markets undermine tribal compacts and state legal guidelines designed to guard shoppers, stop underage playing and protect the integrity of sports activities.

“Prediction markets undermine those regulations that were designed to protect the integrity of the game, to protect consumers, to prevent underage gambling, responsible gambling,” Bean mentioned.

Bean mentioned the CFTC’s latest actions have eliminated tribal and state governments from the controversy over on-line sports activities betting.

“When an action violates our laws, it is our business,” Bean mentioned. “This is sports gambling that one person says is now legal in every state and on every tribal reservation.”

Rep. Jill Tokuda (D-Hawaii) pressed the sovereignty concern additional, noting Hawaii’s prohibition on playing and the broader implications for states which have chosen to not legalize sports activities wagering.

“It’s gambling, it’s gaming,” Tokuda mentioned. “This is regulatory arbitrage. We have a higher standard for tribes and states, and we have a self‑regulatory system that is quite frankly a danger to our people.”

Legal consultants provided a sharply totally different view. Kennedy mentioned sports activities‑associated occasion contracts match inside the Commodity Exchange Act’s broad design and needs to be handled as monetary merchandise on federally regulated markets.

“We’re talking about financial products on federally regulated markets,” Kennedy mentioned. “If someone were to manipulate an interest rate or corn futures, it’s the CFTC’s job to police that, and that does not change if it’s a sports event, political event or financial event.”

Kennedy argued that customers ought to have the flexibility to decide on their regulatory lane. He in contrast the panorama to insurance coverage, noting that customers should purchase state‑regulated protection or enter right into a climate future that gives comparable safety.

That framing drew skepticism from a number of lawmakers who questioned whether or not prediction markets have satisfactory guardrails or enough oversight to justify nationwide entry. Rep. Elissa Slotkin (D-Mich.) pointed to a latest dispute in Michigan, the place CFTC Chairman Michael Selig instructed Kalshi to proceed working regardless of a state courtroom order.

Rob Schwartz, a former CFTC basic counsel, mentioned the episode mirrored a broader breakdown in coordination between federal and state regulators, noting that the surge in litigation reveals how unsettled the regulatory panorama has grow to be.

“The explosion of litigation is not something we’ve seen before,” Schwartz mentioned. “We are in an extraordinary situation, and I think everybody would like to see better cooperation.”

Cylke mentioned the CFTC’s posture has shifted dramatically in a brief interval from a largely passive physique to stepping in on behalf of prediction markets, asserting authority that he mentioned supersedes state and tribal regulators.

“It’s an extraordinary flex that the CFTC has gone from not being involved in the space to now asserting itself,” Cylke mentioned.

As the listening to closed, tribal leaders urged Congress to reaffirm that sports activities betting belongs inside state and tribal gaming frameworks, not on federally regulated prediction markets. Bean mentioned the stakes are clear.

“Prediction markets undermine those regulations,” Bean mentioned. “They undermine the systems tribes and states built to protect their people.”