As part of the Indian Gaming Association (IGA)'s weekly webcast series, The New Normal, Executive Director Jason Giles and Conference Chairman Victor Rocha attempted to cover Tribal regulators' most significant concerns with prediction markets.
Giles began the webinar by stating prediction markets "wrap a pretty bow" around the trading of event contracts, but the gaming type is still viewed as "illegal gambling" in the eyes of the Association.
Call to action
Coincidentally, less than two hours before the webinar began on December 17, IGA released a statement regarding the need for congressional action when regulating prediction markets.
IGA Chairman David Bean, who also recently spoke with Global Gaming Insider in a two-part exclusive interview, had this to say regarding the matter: "Sports betting that is being conducted through prediction markets violates Tribal, federal and state laws - including the Indian Gaming Regulatory Act, which expressly provides Tribal governments with exclusive authority to regulate gaming on Indian lands in partnership with states and the NIGC.
"The Commodity Exchange Act and the (Commodity Futures Trading Commission) CFTC offer none of these protections. It is no coincidence that the prediction market corporations selected the smallest and weakest financial regulatory agency to push out their self-certified, self-regulated online gambling platforms. Complete inaction by the CFTC proves this point.
"We demand that the CFTC do its job, and short of that, we urge Congress to act by amending the CEA to reinforce the existing prohibition against gaming. Tribes have fought for too long and worked too hard to build and preserve the integrity of our industry and the resources that enable Tribal governments to provide for their communities."
Far and few
While Giles and Rocha did not address Chairman Bean's latest statement directly, the pair did speak with Better Markets COO & Policy Director Amanda Fischer, as well as lawyer Scott Crowell, a member of the Crowell Law Firm's Tribal Advocacy Group.
Fischer stated Better Markets has been "one of the few" entities focused on the CFTC, having first began its research into financial derivatives throughout the 2008 US financial crisis. While the non-profit organization was "really concerned" when Kalshi first started offering event contract trading on the 2024 Presidential Election, its "worst fears have been realized" given the rapid growth of prediction markets over the past 12 months.
"It's breaking laws and hoping these agencies are too slow or hamstrung to take action. Operators would rather ask for forgiveness after the fact than permission from regulators," Fischer said.
"Even if the CFTC were committed to properly regulating prediction markets, it's just unfit for purpose and so outside their wheelhouse."
Comparing prediction market operators' self-certification process to an "EZ-Pass," Fischer "could not, in any world" foresee how the Commission would be able to properly regulate the gaming type as it continues to expand across the US.
Especially as more operators introduce event contracts related to sports betting, Fischer questions how the CFTC will gain the tools necessary to identify at-risk gambling or possible betting manipulation as seen in leagues such as the NBA and MLB.
Fischer, along with the rest of the Better Markets team, has already begun reaching out to lawmakers regarding the possible negative side effects of prediction market growth. As regulators continue to see prediction market entities "bragging" about bypassing state and federal statutes, Fischer believes the amount of media coverage being placed on prediction markets will only help achieve Better Markets' goal.
The COO explained: "We could not get anyone to care about this a year ago, but coverage is now exploding. The idea that some of these operators believe you can take a binary option out on whether your home will be destroyed instead of having insurance is insulting.
"It also shows arrogance and ignorance of state laws, and the scary part is they're completely serious."
Winds of change
Speaking more on the recent lawsuits filed either against entities such as Kalshi or by the operators themselves, Crowell's main frustration has been that "none of the litigation even involves the CFTC."
As prediction market disputes continue to be fought between state regulators and operators, the Tribal Advocacy lawyer views the CFTC as "asleep at the switch" and believes "the only reason we're in this mess is because they won't do their job."
"There's nothing within the wherewithal and structure of the CFTC to replace that regulatory oversight," Crowell said. "So long as the CFTC doesn't say no, operators feel they have the authorization to do it, and that it supersedes state law."
Crowell, like Fischer, believes operators are "very serious" when suggesting items such as car or home insurance can be replaced by taking a wager out on whether an individual's possessions will be destroyed.
He states: "There is not a market out there they don't think they can supplant with prediction markets. This isn't just about sports betting, they can reduce the whole world to one outcome."
A positive which has been developing over the past few months, however, is how many "brighter minds" have begun paying closer attention to the risks involved with prediction markets, according to Crowell. If a "brighter light" continues being shined on prediction market operators, Crowell believes it will become "clearer and clearer this is just illegal activity."
Rocha echoed a similar sentiment, commenting on how the "winds are starting to change as so many stupid people are trying to enter" prediction markets. Believing it is IGA's responsibility to "shut (prediction markets) down," Rocha concluded the webinar by stating that's "exactly" what Tribal regulators intend to do as 2025 comes to a close.
With so many involved with gaming now speaking out against prediction markets, one has to ponder how operators itself will respond to such accusations. Perhaps those who took part in The New Normal on December 17 are correct, and operators will continue allowing the lack of CFTC action to decide its fate. Or...could gaming be headed toward one its most contentious battles to date?
A group of prediction market operators, named the Coalition for Prediction Markets, was officially unveiled on December 11, including members such as Kalshi, Crypto.com, Robinhood, Underdog and Coinbase
