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- By Chez Oxendine
- Gaming
House lawmakers questioned Tuesday whether federally regulated sports-event prediction markets are operating outside state and tribal gaming laws, as litigation over the markets continues in several states.
A House hearing, convened by the Subcommittee on Commodity Markets, came as Kalshi and other federally regulated exchanges face lawsuits from tribes and state regulators who argue the exchanges' sports-event contracts are subject to state gaming laws and the Indian Gaming Regulatory Act. The exchanges maintain the contracts are financial derivatives governed by the Commodity Exchange Act.
Lawmakers focused on whether the markets expose minors to gambling, weaken consumer protections and erode tribal and state authority over sports wagering.
The panel featured five witnesses: Indian Gaming Association Chairman David Bean, American Gaming Association Senior Vice President Chris Cylke, former CFTC counsel and Morgan, Lewis & Bockius LLP partner Rob Schwartz, derivatives attorney Carl Kennedy of Katten Muchin Rosenman and Solidus Labs CEO Asaf Meir.
Lawmakers raised an array of concerns, ranging from the CFTC’s lack of staffing to potential customer abuse and gaming integrity questions.
Rep. Shomari Figures (D-Ala.) said the platforms are reaching minors and bypassing the guardrails tribes and states require. He questioned whether younger adults who are too young to legally purchase alcohol should nonetheless be able to trade financial products that closely resemble sports betting.
Bean, an enrolled member of the Puyallup Tribe, told lawmakers that prediction markets undermine tribal compacts and state laws designed to protect consumers, prevent underage gambling and preserve the integrity of sports.
“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 said.
Bean said the CFTC’s recent actions have removed tribal and state governments from the debate over online sports betting.
“When an action violates our laws, it is our business,” Bean said. “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 issue further, noting Hawaii’s prohibition on gambling and the broader implications for states that have chosen not to legalize sports wagering.
“It’s gambling, it’s gaming,” Tokuda said. “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 experts offered a sharply different view. Kennedy said sports‑related event contracts fit within the Commodity Exchange Act’s broad design and should be treated as financial products on federally regulated markets.
“We’re talking about financial products on federally regulated markets,” Kennedy said. “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 consumers should have the ability to choose their regulatory lane. He compared the landscape to insurance, noting that consumers can buy state‑regulated coverage or enter into a weather future that provides similar protection.
That framing drew skepticism from several lawmakers who questioned whether prediction markets have adequate guardrails or sufficient oversight to justify nationwide access. Rep. Elissa Slotkin (D-Mich.) pointed to a recent dispute in Michigan, where CFTC Chairman Michael Selig instructed Kalshi to continue operating despite a state court order.
Rob Schwartz, a former CFTC general counsel, said the episode reflected a broader breakdown in coordination between federal and state regulators, noting that the surge in litigation shows how unsettled the regulatory landscape has become.
“The explosion of litigation is not something we’ve seen before,” Schwartz said. “We are in an extraordinary situation, and I think everybody would like to see better cooperation.”
Cylke said the CFTC’s posture has shifted dramatically in a short period from a largely passive body to stepping in on behalf of prediction markets, asserting authority that he said 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 said.
As the hearing closed, tribal leaders urged Congress to reaffirm that sports betting belongs within state and tribal gaming frameworks, not on federally regulated prediction markets. Bean said the stakes are clear.
“Prediction markets undermine those regulations,” Bean said. “They undermine the systems tribes and states built to protect their people.”
