WA State prevails in court challenge as Judge finds prediction market Kalshi likely violates state gambling rules; WA’s 29 tribal casinos generate $1.5B in tax revenue
WASHINGTON, D.C. – U.S. Senator Maria Cantwell (D-WA), ranking member of the Senate Committee on Commerce, Science, and Transportation and the former chair and longest serving member of the Senate Committee on Indian Affairs, joined her colleagues in a letter urging the leadership of two key Senate committees to rein in prediction markets that are misusing federal commodity and derivatives rules to offer nationwide sports and event wagering, which infringes on tribal gaming sovereignty and circumvents state regulatory powers.
“The rapid expansion of sports event contracts through prediction markets and online casino-style gaming poses an existential threat to tribal sovereignty by undermining the revenue that tribes rely on for government services,” the senators wrote to U.S. Senate Committee on Banking, Housing, and Urban Affairs Chairman Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA); and U.S. Senate Committee on Agriculture, Nutrition, and Forestry Chairman John Boozman (R-AR) and Ranking Member Amy Klobuchar (D-MN). “The Digital Asset Market Clarity Act (CLARITY Act) and Digital Commodity Intermediaries Act (DCIA), as currently drafted, will only serve to exacerbate these issues by further removing regulatory accountability for decentralized finance (DeFi) betting protocols that deploy unvetted prediction and wagering markets, directly infringing on instances of tribal gaming exclusivity and state police powers,” they stressed.
The letter was led by U.S Senator Martin Heinrich (D-NM) and signed by Richard Blumenthal (D-CT), Mark Kelly (D-AZ), Patty Murray (D-WA), Tammy Baldwin (D-WI), Alex Padilla (D-CA), Jacky Rosen (D-NV), Adam Schiff (D-CA), Brian Schatz (D-HI), and Gary Peters (D-MI).
The rapid expansion of sports event contracts through prediction markets and online casino-style gaming poses an existential threat to tribal sovereignty by undermining the revenue that tribes rely on for government services such as healthcare, public safety, education, housing, and social services.
In Washington state:
- All 29 federally recognized tribes have Class III gaming compacts with the State of Washington. Twenty-three tribes operate 29 casino gaming locations across the state.
- Tribal governments generate over $7.4 billion in gross state product and $1.5 billion in tax revenue and tribal revenue share payments annually.
- Unlike commercial casinos, all net gaming revenue are reinvested in tribal government services, including education, healthcare, infrastructure, law enforcement, and emergency services.
On July 20, Judge John McHale of the King County Superior Court granted Washington State’s motion for a preliminary injunction to block Kalshi from offering its “event contracts” in the state. The judge’s ruling said the state showed “a likelihood of actual and substantial injury to Washington consumers from illegal gambling activities” and that the public interest and potential harm to consumers outweighed harm to Kalshi. According to the State Attorney General, “The Court will issue a final order prohibiting Kalshi from continuing to violate Washington law on August 5, giving Kalshi and the AG’s office time to confer on the terms of the injunction and provide further briefing to the Court about appropriate remedies.”
In May, at a Commerce subcommittee hearing on the unchecked expansion of prediction markets into sports gambling — Sen. Cantwell pressed witnesses, demanding answers about how these platforms are undermining tribal sovereignty.
“So, my state wants to know why the Indian gaming [operations] – who basically have lived by the rules in their state and lived by the rules of a regulated entity – are now all of a sudden competing with somebody that is not a regulated entity that’s basically offering the same product,” stated Sen. Cantwell at the May hearing. “If the prediction markets are allowed to keep operating unchecked does this pose an existential threat to both tribal sovereignty and to Indian Country, and what can Congress do to better protect Indian gaming?”
Video of Sen. Cantwell questioning witnesses at that May hearing is HERE; a transcript is HERE.
The legal and jurisdictional framework governing all gambling operations, including sports wagers, on tribal lands is established pursuant to the Indian Gaming Regulatory Act (IGRA) of 1988. Eventually, tribes also entered the legalized sports betting market in 2018 following the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association.
Currently, prediction markets claim to derive their operational authority from the Commodity Futures Trading Commission (CFTC), which has asserted its exclusive jurisdiction to oversee and regulate all prediction markets and continues to erroneously classify these products as financial swaps or derivatives rather than gambling.
“Any further Congressional grant of exclusive CFTC jurisdiction over digital asset markets without ample guardrails for prediction market contracts will reinforce the CFTC’s claimed exclusive authority over event contracts and permanently circumvent the hard-won regulatory and economic protections established under IGRA and states’ police powers,” the senators underscored in their letter.
The senators continued, “Moreover, as currently drafted, the DCIA contains explicit exemptions from CFTC regulatory jurisdiction, and the CLARITY Act contains parallel exemptions from federal securities oversight for platform developers and non-custodial DeFi infrastructure providers that would effectively allow prediction markets to offer online casino-style gaming and sports betting across the United States, entirely bypassing the localized tribal-state regulatory systems required by IGRA.”
The senators concluded their letter by urging the leadership of both committees to amend both the CLARITY Act and the Digital Commodity Intermediaries Act to include:
- An IGRA and tribal-state compacts savings clause; and
- Prohibitions on CFTC-registered entities from listing prediction contracts that resemble sports bets or casino-style gaming products.
- This includes an explicit statement that nothing shall preempt, repeal, or limit tribal authority under the IGRA, along with clear assurances that CFTC-regulated prediction or digital commodity markets cannot be used to circumvent existing tribal-state gaming compacts.
- This also includes limits to any carve-outs for digital asset platforms by prohibiting online sports wagering or event-based prediction markets in jurisdictions where tribes hold gaming rights.
The letter is supported by the Indian Gaming Association (IGA), National Congress of American Indians (NCAI), Santa Ana Pueblo, Sandia Pueblo, Ohkay Owingeh Pueblo, Laguna Pueblo, San Felipe Pueblo, Kewa Pueblo, Cochiti Pueblo, Acoma Pueblo, Jemez Pueblo, Santa Clara Pueblo, Taos Pueblo, Tesuque Pueblo, Zia Pueblo, Isleta Pueblo, Pojoaque Pueblo, and Mescalero Apache Tribe.
The full text of the letter is here and below:
Dear Chair Scott, Ranking Member Warren, Chair Boozman, and Ranking Member Klobuchar:
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. The Digital Asset Market Clarity Act (CLARITY Act) and Digital Commodity Intermediaries Act (DCIA), as currently drafted, will only serve to exacerbate these issues by further removing regulatory accountability for decentralized finance (DeFi) betting protocols that deploy unvetted prediction and wagering markets, directly infringing on instances of tribal gaming exclusivity and state police powers. As negotiating efforts between the U.S. Senate Committee on Banking, Housing, and Urban Affairs and U.S. Senate Committee on Agriculture, Nutrition, and Forestry continue, we submit that failing to address these concerns through forthcoming legislation would constitute a direct conflict with the basic tenets of tribal sovereignty, dereliction of U.S. trust and treaty obligations to tribes across the country, and a violation of states’ police powers.
The rapid expansion of sports event contracts through prediction markets and online casino-style gaming poses an existential threat to tribal sovereignty by undermining the revenue that tribes rely on for government services. The legal and jurisdictional framework governing all gambling operations, including sports wagers, on tribal lands is established pursuant to the Indian Gaming Regulatory Act (IGRA). Upon its passage in 1988, IGRA’s stated purpose was “to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.” The framework established by IGRA created a regulatory environment that helped make tribal gaming revenue one of the largest contributors to tribal government services such as healthcare, public safety, education, housing and social services. For instance, since the 1990 census, the real income of Native people living on a reservation has grown by 63%, and the poverty rate for reservation families with children was down to 27% by 2018, compared to more than 47% in 1989.[3] Following IGRA’s passage, the number of U.S. census tracts with an American Indian tribal casino operation surged from near zero in 1989 to nearly 600 by 2019, leading to skyrocketing gaming revenues for tribes. Eventually, tribes also entered the legalized sports betting market in 2018 following the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association.
Currently, prediction markets are misusing federal commodity and derivatives rules to offer nationwide sports and event wagering, completely ignoring state and tribal gaming licenses and regulations. These platforms claim to derive their operational authority from the Commodity Futures Trading Commission (CFTC), which has asserted its exclusive jurisdiction to oversee and regulate all prediction markets and continues to erroneously classify these products as financial swaps or derivatives rather than gambling. Any further Congressional grant of exclusive CFTC jurisdiction over digital asset markets without ample guardrails for prediction market contracts will reinforce the CFTC’s claimed exclusive authority over event contracts and permanently circumvent the hard-won regulatory and economic protections established under IGRA and states’ police powers. Moreover, as currently drafted, the DCIA contains explicit exemptions from CFTC regulatory jurisdiction, and the CLARITY Act contains parallel exemptions from federal securities oversight for platform developers and non-custodial DeFi infrastructure providers that would effectively allow prediction markets to offer online casino-style gaming and sports betting across the United States, entirely bypassing the localized tribal-state regulatory systems required by IGRA.
Accordingly, we urge the adoption of two amended protections through any forthcoming legislation: 1) an IGRA and tribal-state compacts savings clause; and 2) prohibitions on CFTC-registered entities from listing prediction contracts that resemble sports bets or casino-style gaming products. This should include an explicit statement that nothing shall preempt, repeal, or limit tribal authority under the IGRA, along with clear assurances that CFTC-regulated prediction or digital commodity markets cannot be used to circumvent existing tribal-state gaming compacts. It should also limit any carve-outs for digital asset platforms by prohibiting online sports wagering or event-based prediction markets in jurisdictions where tribes hold gaming rights. Any exemptions for DeFi must be limited solely to the spot market regulatory provisions added by this bill (e.g., new sections 4k(7), 4u, and 5i) and not extend to existing derivatives regulatory provisions. This will prevent derivatives, event contracts, sports bets or casino style games from evading regulation by migrating onto unregulated DeFi platforms. If Congress fails to address these concerns imminently, prediction markets will continue to violate tribal sovereignty and states’ rights, while the CLARITY Act and DCIA provide for fully unregulated online gaming platforms, further eroding the federal framework intended to guarantee a primary pillar of tribal sovereignty.
Sincerely,