Congress Confronts Prediction Market Gambling Loophole as Tribal Gaming Groups Push Back

Congress is wrestling with a question that has become impossible to ignore as prediction market platforms keep growing: if a company lets Americans bet money on the outcome of a football game, a player’s performance, or a casino-style contest, should that company be allowed to skip the licensing, taxes, and consumer protections every other sports betting operator has to follow? The House Agriculture Subcommittee on Commodity Markets, Digital Assets and Rural Development tackled that exact question during a hearing titled “Examining Customer Protections and Market Integrity in Sports Event Prediction Markets,” and the tension in the room made clear that lawmakers are still far from a consensus.

The debate centers on platforms like Kalshi and Polymarket, which offer “event contracts” tied to sports outcomes — moneylines, totals, player props, and parlays — under the regulatory umbrella of the Commodity Futures Trading Commission rather than state gaming law. Critics argue that structure amounts to a loophole letting prediction markets run a nationwide sports gambling business while sidestepping the framework that governs every licensed sportsbook.

Tribal and Commercial Gaming Groups Sound the Alarm

The Indian Gaming Association and the American Gaming Association delivered joint testimony at the hearing, telling lawmakers that prediction market sports contracts have already cost states and tribes more than $1.2 billion in lost gaming tax revenue since platforms began listing sports event contracts. IGA Chairman David Bean argued that Indian Country supports genuine financial innovation but opposes what he called a “weak regulatory agency” being used to offer nationwide online sports gambling to users as young as 18. Bean told the subcommittee that prediction markets “have invented nothing” beyond replicating existing sportsbook products while avoiding the oversight those products require.

AGA Senior Vice President of Government Relations Chris Cylke echoed that argument, telling the committee that sports contracts on platforms like Kalshi and Polymarket “make a mockery of Congressional intent” by stripping away protections licensed sportsbooks must provide — age verification, geofencing, responsible gambling tools, and suspicious-activity monitoring. Cylke also raised integrity concerns, noting that regulated operators actively monitor betting patterns for signs of match-fixing or manipulation in a way prediction markets are not required to replicate.

Bean laid out three specific steps he wants Congress to take: advance H.R. 7840, the Event Contract Enforcement Act, to reaffirm existing federal law against sports gambling through prediction markets; ensure the CLARITY Act explicitly protects the Indian Gaming Regulatory Act and state gaming statutes from being undercut by event contracts; and reject a pending CFTC proposal that would strip away long-standing restrictions on gaming-related event contracts.

No Clear Path to a Ban Yet

Despite the pointed testimony, much of the subcommittee’s questioning focused on improving CFTC oversight and staffing rather than pursuing an outright ban on sports event contracts. Several lawmakers directed their questions toward witnesses who argued prediction markets could continue operating if paired with stronger regulatory guardrails, rather than treating the platforms as inherently illegal. Notably, no executives from Kalshi or Polymarket appeared as witnesses at the hearing, leaving the exchanges’ side of the argument to be represented indirectly through legal and industry voices.

As it stands, no bill banning sports event contracts has passed either chamber of Congress. The hearing builds a legislative record that could inform future action, but any real measure would still need to clear the full House Agriculture Committee, the House floor, the Senate, and ultimately a presidential signature — a long road with plenty of opportunity for the effort to stall. In the meantime, state-level enforcement actions against prediction market operators continue to multiply across the country, even as the CFTC maintains it holds exclusive jurisdiction over the event contracts in dispute.

That jurisdictional standoff is really the crux of the fight. Kalshi and similar exchanges maintain their sports-linked products are financial derivatives governed by the Commodity Exchange Act, not gambling products subject to state law. Tribal leaders and state regulators disagree, arguing the contracts are functionally identical to the wagers offered by licensed sportsbooks and therefore belong under existing tribal and state gaming frameworks, including the protections built into the Indian Gaming Regulatory Act.

For everyday bettors, the outcome of this fight will shape which platforms remain available and under what rules. Anyone weighing whether to use a prediction market alongside a traditional bookmaker should know that the two operate under very different oversight structures right now — a gap regulators and Congress are still trying to figure out how, or whether, to close.