Victor Rocha and Jason Giles from the Indian Gaming Association featured three prominent tribal gaming attorneys on the IGA’s recent New Normal webinar series. They discussed the impact of prediction markets on tribal sovereignty and gaming rights. The series has previously tackled the challenge posed by sweepstakes sites and is now focusing on the expanding realm of prediction markets.
During the discussion, Joseph Webster, Bryan Newland, and Scott Crowell labeled prediction markets, particularly in relation to sports contracts, as a significant threat to Indian gaming. They emphasized the need to identify the most effective legal strategies moving forward.
Jason Giles, the executive director of the IGA in Washington, shared insights from his recent conversations with policymakers, highlighting a general lack of awareness on the subject. He mentioned interactions with Nevada officials who indicated no prior engagement from the state’s commercial operators regarding this issue.
Tribe representatives have been vocal opponents of prediction markets, which are legally operational in all 50 states, including those with agreements with tribes for gaming exclusivity. The majority of feedback received by the Commodity Futures Trading Commission, the current regulator of prediction markets, following the opening of a public comment portal earlier this year, has come from tribal entities.
While Indian Country has not directly engaged in legal action concerning prediction markets, state regulators are currently spearheading lawsuits against Kalshi in three states. However, panelists noted that tribes also have leverage in this battle, thanks in part to the Indian Gaming Regulatory Act.
The Authority Dilemma
Jurisdiction plays a crucial role in this matter for all parties involved. Prediction markets like Kalshi argue that they are federally legal under the CFTC and thus preempt state gaming laws. Kalshi has obtained preliminary injunctions to operate in Nevada and New Jersey after countersuing both states.
Scott Crowell expressed concern that states now find themselves in a position of challenging the federal government due to the evolving landscape of election betting and prediction markets. The recent shift in federal perspectives under President Donald Trump’s administration has further complicated the situation.
Notably, states and tribes have found themselves aligned in combating these challenges. States are feeling their jurisdiction eroded by unwanted gaming expansions, creating a unique alliance with tribes in this fight. Tribes may have a stronger legal standing due to the Indian Gaming Regulatory Act.
The Significance of IGRA
Bryan Newland suggested that if the Commodities Exchange Act supersedes state gaming laws, then so does IGRA. The interplay between CEA and IGRA remains uncertain, with previous arguments proving ineffective.
Joseph Webster highlighted the mention of IGRA in a Kalshi brief against Nevada, emphasizing the company’s stance on sports event contracts. The contention revolves around the scope of IGRA’s authority and the exclusive jurisdiction of the CFTC.
Introducing IGRA into the legal discourse could bring clarity for tribes, even in scenarios where legal battles are lost, Newland contended.
The Impact of Language
While existing CFTC regulations prohibit gaming-related contracts, Kalshi successfully argues that prediction markets do not constitute gaming. Panelists cautioned that these early victories could be overturned, especially as prediction markets expand into sports, deviating from their intended economic hedging purpose.
Referencing Kalshi’s marketing materials, Scott Crowell pointed out the strategic use of language, likening it to a Jedi mind trick. The evolving situation poses challenges and opportunities for all involved parties in navigating this complex issue.
Taking a Stand
Stakeholders must prepare for various outcomes as the situation evolves. Tribes, heavily reliant on gaming for economic sustenance, face the imperative of protecting their assets. Commercial operators, not facing the same urgency, could adapt their businesses to prediction markets, potentially reducing tax burdens and regulatory obligations.
Amid these shifts, tribes must defend their interests against rapid changes, with Scott Crowell noting the unprecedented speed of this existential threat. The urgency of the situation was emphasized by Joseph Webster, indicating that the threat posed by prediction markets is not on the horizon but already present.
