Tribal Gaming Groups, Senators Push to Rewrite Clarity Act Over Prediction Markets

Tribal gaming leaders and a bipartisan handful of U.S. senators are pushing to rewrite part of the Digital Asset Market Clarity Act, arguing the crypto-focused bill could otherwise let prediction market platforms sidestep decades of state and tribal gambling law. The push surfaced this week at a Senate Indian Affairs Committee roundtable, where Indian Gaming Association Vice Chairman Tehassi Hill asked lawmakers to add language barring sports and casino wagering through prediction markets unless it complies with existing state and tribal regulatory frameworks.

The Clarity Act, which already cleared the House earlier this year, is designed to establish federal rules for digital assets and commodity markets. But as prediction market platforms like Kalshi and Polymarket have expanded into sports-outcome contracts, tribal gaming interests and state regulators say the legislation has become an unintended vehicle for the Commodity Futures Trading Commission to claim jurisdiction over what has traditionally been state and tribal territory.

Senators Look for a “Simple” Fix

Sen. Tina Smith, D-Minn., told the roundtable that Congress has more than one option for closing what she views as a legal gap. She suggested lawmakers could attach clarifying language to either the Clarity Act or the Farm Bill — a much broader piece of legislation Congress has previously used to carry unrelated policy riders. “I think we do have moving vehicles that could just clarify that the Commodity Futures Trading Commission, the Commodity Futures Act, does not preempt IGRA or tribal-state contracts,” Smith said, referring to the Indian Gaming Regulatory Act. “Prediction markets need to abide by existing law. That seems to me to be fairly simple and non-controversial.”

Hill’s testimony echoed concerns that have been building across the gambling industry for months as prediction markets have grown into a parallel, largely unregulated channel for sports wagering. The American Gaming Association has estimated that states and tribal governments have already lost roughly $1 billion in revenue tied to the prediction markets boom, a figure Smith referenced during the hearing. Unlike licensed sportsbooks, which pay state taxes and operate under tribal-state gaming compacts, prediction market platforms have argued they fall under federal commodities law and are therefore exempt from state-by-state licensing.

CFTC Pushback and a Broader Fight

Not everyone in Washington is on board with carving out gaming exceptions. CFTC Chair Michael Selig has repeatedly asserted that his agency holds exclusive jurisdiction over prediction markets, and the commission has gone to court to challenge state enforcement actions attempting to shut down or restrict sports-related contracts. The Trump administration has backed Selig’s position, framing federal oversight of these markets as a policy priority.

States haven’t backed down either. Attorneys general from 44 states asked the CFTC in June to withdraw its proposed Rule 40.11, arguing the agency overstepped the authority Congress granted it under the Commodity Exchange Act. That fight over federal versus state control has now spilled directly into the Clarity Act debate, with Senate Agriculture Committee Chair John Boozman, R-Ark. — who shepherded the bill through his committee — reportedly resistant to attaching prediction market provisions to either the Clarity Act or the Farm Bill.

The outcome could have real stakes for the broader sports betting and prediction markets industry. If tribal gaming groups succeed in getting IGRA-protective language into a bill Congress is racing to pass, platforms like Kalshi and Polymarket could face new restrictions on offering sports contracts in states with existing tribal compacts. If they don’t, the current gray area — where prediction markets operate largely outside state licensing regimes that govern traditional sportsbooks — could become more entrenched just as the platforms continue to scale.

Why Tribal Gaming Sees This as Existential

For tribal nations, the fight isn’t abstract. Gaming compacts negotiated between tribes and states over decades are built on exclusivity — tribes agreed to revenue-sharing arrangements and regulatory oversight in exchange for the right to operate casinos and, in many states, sports betting within their borders. If prediction market platforms can offer functionally identical sports contracts under federal commodities rules instead, tribal leaders argue those compacts lose much of their value overnight, regardless of what a state legislature or gaming commission decides.

That’s the core of Hill’s argument to the Senate Indian Affairs Committee: the issue isn’t whether prediction markets should exist, but whether they should be allowed to offer what amounts to sports betting without the licensing, taxation, and consumer-protection requirements that apply to every other operator in the space. Traditional sportsbooks and casinos, by contrast, already navigate a patchwork of state-by-state rules and often lean on tools like odds and probability calculators to help bettors understand markets that are, at least, clearly regulated.

For now, the amendment fight remains unresolved, and it’s unclear whether either the Clarity Act or the Farm Bill will move quickly enough to serve as the legislative vehicle Smith and tribal leaders are hoping for. What is clear is that the debate over who regulates sports-outcome trading — state gaming commissions and tribal governments, or federal commodities regulators — is no longer a side issue. It has become one of the more consequential open questions facing the sports betting and prediction markets industry heading into the fall legislative session.